Collateral
Lending & MortgagesAn asset pledged as security for a loan, which the lender can seize if the borrower defaults.
Example
Example: Suppose you take out a $300,000 30-year fixed mortgage at 6.5%. Understanding collateral helps you see how your monthly payment of approximately $1,896 is structured — and how this concept affects your total cost over the life of the loan. Use our mortgage calculator to see how collateral impacts your specific situation.