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What Is Collateral?

By Kristi WaterworthUpdated Feb 26, 2025 at 3:18 PM

Key Points

  • Secured loans offer lower interest rates and longer repayment terms by using valuable assets as collateral.
  • Common collateral types include real estate for mortgages and automobiles for car loans.
  • Collateral reduces lending risk, enabling loans for larger amounts or to borrowers with lower credit scores.

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