Additional Collateral

Loading the player...

DEFINITION of 'Additional Collateral'

Additional assets put up as collateral by a borrower against debt obligations. Additional collateral is used to lessen the risk to the lender. Creditors might require extra collateral in order for a given loan to remain at a constant interest level, or to appease investors or a credit committee. Such collateral might include cash, certificates of deposit, equipment, stock or letters of credit.

BREAKING DOWN 'Additional Collateral'

Collateral is commonly used when securing loans as a way to increase the likelihood of repayment. If the borrower defaults on a loan, the lender would have the right to acquire the collateral in an attempt to pay off the remaining debt. If additional funds are lent, then more collateral might also be required.

For example, if a lender requires that a $2,000 asset be pledged as collateral for a $10,000 loan, the $2,000 asset is considered collateral. If at some point additional funds are required or the lender feels that the borrower has become too risky, then additional collateral might be needed (if the contract allows it).

RELATED TERMS
  1. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  2. Bad Paper

    Unsecured short-term fixed income instrument that is issued either ...
  3. Borrowing Base

    The amount of money a lender will loan to a company based on ...
  4. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  5. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  6. Overcollateralization - OC

    The process of posting more collateral than is needed to obtain ...
Related Articles
  1. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  2. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  3. Retirement

    Getting A Loan Without Your Parents

    Use the 5 "W"s to finance your dreams without banking on a second signature.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Personal Finance

    Why Are Mortgage Rates Increasing?

    Learn how the secondary mortgage market and investor demand affect the cost of home ownership.
  6. Credit & Loans

    A FICO-free Loan? See SoFi's Super Bowl Ad

    Non-bank lender SoFi will air its first TV ad during Super Bowl 50. Here's how it's challenging big banks by providing an alternative approach to loans.
  7. Credit & Loans

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
  8. Term

    Who Benefits from Microfinance?

    Microfinance describes banking services provided to low-income people or groups. Specific services offered by microfinance institutions include microloans, micro-savings and micro-insurance products.
  9. Home & Auto

    What to Do When You Can No Longer Afford Your Car

    Life is full of unexpected and undesired events, like layoffs or divorce. Unfortunately, these events can sometimes make your car payment unaffordable.
  10. Insurance

    Cashing In Your Life Insurance

    In tough economic times, tapping into a life insurance policy can provide a needed source of funds.
RELATED FAQS
  1. Are mortgage-backed securities backed by any guarantees?

    Actually, any mortgage-backed security (MBS) guarantee depends on who issued it. To review, an MBS is a security, created ... Read Full Answer >>
  2. Can a debt collector contact me about a debt that's no longer on my credit report?

    According to Experian, a debt collector is permitted to contact a consumer about a debt that is no longer on the consumer's ... Read Full Answer >>
  3. Can personal loans be transferred to another person?

    Personal loans cannot be transferred to another person, because these loans are determined based on your unique credit score ... Read Full Answer >>
  4. Are personal loans considered income?

    Personal loans are not considered income for the borrower unless the loan is forgiven. In other words, you cannot be taxed ... Read Full Answer >>
  5. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
  6. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center