After-Acquired Collateral

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DEFINITION of 'After-Acquired Collateral'

Collateral for a loan obtained after the borrower has already entered into a loan agreement. The necessity for after-acquired collateral arises when the borrower has insufficient collateral for the loan, but may be acquiring additional property in the near term. This property would serve as after-acquired collateral, and would be automatically collateralized.

BREAKING DOWN 'After-Acquired Collateral'

The requirement for after-acquired collateral is generally explained in the loan agreement. The need may arise if the lending institution requires more collateral than the borrower can put up, in order to have a greater degree of security for the loan. In this case, the borrower agrees to pledge all future property up to a certain amount, as additional collateral for the loan.

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