Collateral Value


DEFINITION of 'Collateral Value'

The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal from a qualified expert. If publicly traded securities are being used, then the current price of the securities is the collateral value. However, marketable securities are subject to the margin requirement restrictions mandated by the Federal Reserve Board.


Loading the player...

BREAKING DOWN 'Collateral Value'

In most cases, the amount of the loan given will not exceed the collateral value of the assets, and will usually be less than its fair market value. This is because most lenders will assess collateral property at its fire-sale value and not its actual cost or current value. This is for both the borrower's and lender's protection.

  1. Working Capital

    Working capital is a measure of both a company's efficiency and ...
  2. Side Collateral

    A pledge that partially collateralizes a loan. The pledge can ...
  3. Collateral Value Insurance

    A type of business insurance used by lenders to guarantee the ...
  4. Lead Bank

    A bank that oversees the arrangement of a loan syndication. The ...
  5. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
Related Articles
  1. Credit & Loans

    A Guide To Debt Settlement

    Find out how you can negotiate your way to a lower debt load by paying up front.
  2. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  3. Options & Futures

    Choose To Beat The Bank

    From internet banking to credit unions, it's in your power to cut fees and maximize service.
  4. Retirement

    Getting A Loan Without Your Parents

    Use the 5 "W"s to finance your dreams without banking on a second signature.
  5. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  6. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  7. Active Trading Fundamentals

    How Does Fundera Work and Make Money?

    Learn more about Fundera, the online loan broker service agency, and discover what it offers and how it makes money through its service.
  8. Budgeting

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  9. Professionals

    3 ETFs to Play the Fed's Interest Rate Decision

    These three ETFs offer strong ways to play the Federal Reserve's decision not to raise rates.
  10. Investing Basics

    Is a Rate Hike Already Priced Into the Market?

    Is the recent selloff in equities related to the Fed's probable interest rate hike, or are problems bigger than the Fed wants us to believe?
  1. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  2. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  3. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  4. What are the goals of a "dove" Federal Reserve head?

    The goals of a dovish Federal Reserve head are to maintain low interest rates, stimulate the overall economy, decrease the ... Read Full Answer >>
  5. What is the opposite of a "dove"?

    A dove is an economic policy adviser who favors maintaining low interest rates in hopes of stimulating the economy, while ... Read Full Answer >>
  6. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!