Collateral is an asset pledged by the borrower and accepted by the lender as security for loan repayment. In the case of default, the lender will have the right to seize and sell the asset to recover their losses. Collateral is usually linked to the loan purpose (underlying property for a real estate loan, a car for a car loan, etc.) but doesn’t have to be (e.g., a property-backed business loan). You can find out more about collateral types in our guide to understanding collateral in real estate crowdfunding.