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. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Lien

    The legal right of a creditor to sell the collateral property ...
  5. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  6. Additional Collateral

    Additional assets put up as collateral by a borrower against ...
Related Articles
  1. CDOs And The Mortgage Market
    Insurance

    CDOs And The Mortgage Market

  2. Will Insurance Keep Your Business Safe?
    Entrepreneurship

    Will Insurance Keep Your Business Safe?

  3. Why Hedge Funds Love Distressed Debt
    Mutual Funds & ETFs

    Why Hedge Funds Love Distressed Debt

  4. These Financial Products Are Too Complex ...
    Options & Futures

    These Financial Products Are Too Complex ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center