COLLATERALISED Meaning and
Definition
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Collateralised, also spelled as "collateralized," is an adjective that refers to the act of providing collateral to secure a loan or a financial obligation. The term is commonly used in the field of finance and banking, particularly in relation to lending and investments.
In financial transactions, collateral is an asset or property that a borrower pledges to a lender as a form of security in case of default. By collateralising a loan or investment, the borrower or investor offers something of value to the lender as a guarantee that the debt will be repaid, reducing the lender's risk.
The act of collateralising involves the identification and agreement upon specific assets or forms of securities that will serve as collateral. These assets can include real estate, vehicles, stocks, bonds, or other valuable possessions that can be easily liquidated if necessary. The lender holds a legal claim on the collateral until the loan or investment is fully repaid.
Collateralisation offers increased protection to lenders and investors, as it mitigates some of the potential losses in case the borrower defaults. It is an established method to reduce credit risk and evaluating the borrower's ability to repay the loan or fulfill financial obligations. Collateralised loans often offer borrowers access to better loan terms, as the collateral provides a sense of security to the lender.
Overall, the term "collateralised" refers to the action of securing a loan or an investment by pledging valuable assets or securities as collateral, providing a layer of protection to lenders and reducing the risk associated with the transaction.
Etymology of COLLATERALISED
The word "collateralised" is derived from the noun "collateral" and the suffix "-ize" (also spelled "-ise" in British English).
The term "collateral" originated from the Latin word "collaterālis", which is a combination of "col-" (meaning "together") and "laterālis" (meaning "sideways"). This Latin term referred to something situated or running alongside something else. Over time, "collateral" came to be used in the context of security or guarantee, specifically referring to assets or property pledged by a borrower to secure a loan.
The addition of the "-ize" suffix to "collateral" forms the corresponding verb "collateralize" (or "collateralise" in British English). This suffix is commonly used in English to create verbs from nouns, indicating the process or action of a given noun.
