After-Acquired Collateral


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.

  1. Debt Security

    Any debt instrument that can be bought or sold between two parties ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Debtor

    A company or individual who owes money. If the debt is in the ...
  6. Overcollateralization - OC

    The process of posting more collateral than is needed to obtain ...
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