Side Collateral

AAA

DEFINITION of 'Side Collateral'

A pledge that partially collateralizes a loan. The pledge can be a physical asset, financial asset or personal guarantee. While physical or financial assets can be assigned an underlying price or value, personal guarantees depend solely on the character of the borrower. Most commercial lenders will not accept side collateral as a means to secure a loan or line of credit.

INVESTOPEDIA EXPLAINS 'Side Collateral'

When accepting side collateral (physical, financial or cash), the borrower will typically sign a security agreement that gives the lender legal authority to sell or dispose of the collateral if s/he does not repay the loan or debt obligation. The security agreement can also be filed with a public records office as the financing agreement between both parties.

An example of side collateral would be pledging $1,000 of assets to obtain a $10,000 loan.
 

VIDEO

RELATED TERMS
  1. Collateral Value

    The estimated fair market value of an asset that is being used ...
  2. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
  3. Lien

    The legal right of a creditor to sell the collateral property ...
  4. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  5. Additional Collateral

    Additional assets put up as collateral by a borrower against ...
  6. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
Related Articles
  1. Insurance

    CDOs And The Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  2. Entrepreneurship

    Will Insurance Keep Your Business Safe?

    Skilled employees are key to a successful business. Find out how to avoid a financial setback if they leave.
  3. Mutual Funds & ETFs

    Why Hedge Funds Love Distressed Debt

    When hedge funds buy up bonds from bankrupt companies, should investors follow suit?
  4. Options & Futures

    These Financial Products Are Too Complex For The Average Joe

    Structured financial products are so elaborate that investors are unable to assess costs and risk.
  5. Mutual Funds & ETFs

    Fatal Seduction Of The Municipal Bond Insurers

    Learn how a foray into CDOs and other exotic products ruined an industry's image.
  6. Personal Finance

    The Fuel That Fed The Subprime Meltdown

    Take a look at the factors that caused this market to flare up and burn out.
  7. Credit & Loans

    What is the difference between APR and APY?

    Learn about the difference between the calculations for APR and APY. APY takes into account the number of times that the interest rate is applied on an amount.
  8. Credit & Loans

    What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between parties that have no relationship.
  9. Credit & Loans

    When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, risk-free and successful.
  10. Fundamental Analysis

    How accurate or important is the debt service coverage ratio (DSCR) in evaluating whether to invest ...

    See how investors can use the debt service coverage ratio to evaluate the solvency of a company before making an investment decision.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center