What term relates to property used as a security for a debt or loan?

What term relates to property used as a security for a debt or loan?

• A. Collateral
• B. Asset
• C. Guarantee
• D. Equity

Answer: (A)

The term that relates to property used as a security for a debt or loan is collateral. In financial terms, collateral refers to an asset that a borrower offers to a lender to secure a loan. This collateral can take many forms, including real estate, vehicles, or other valuable items. If the borrower fails to repay the loan as agreed, the lender has the right to seize the collateral to recover their losses. In the context of a mortgage, for example, the home itself serves as collateral for the loan. This means that if the homeowner defaults on the mortgage payments, the lender can take possession of the home through foreclosure. While an asset refers to any resource owned by an individual or entity that has economic value, it does not specifically denote that the asset is being used to secure a loan. Guarantee usually refers to a promise or assurance that a loan will be repaid, often involving a third party. Equity represents ownership interest in a property after subtracting any debts secured against it, rather than the property being used as security itself.

The term that relates to property used as a security for a debt or loan is collateral. In financial terms, collateral refers to an asset that a borrower offers to a lender to secure a loan. This collateral can take many forms, including real estate, vehicles, or other valuable items. If the borrower fails to repay the loan as agreed, the lender has the right to seize the collateral to recover their losses.

In the context of a mortgage, for example, the home itself serves as collateral for the loan. This means that if the homeowner defaults on the mortgage payments, the lender can take possession of the home through foreclosure.

While an asset refers to any resource owned by an individual or entity that has economic value, it does not specifically denote that the asset is being used to secure a loan. Guarantee usually refers to a promise or assurance that a loan will be repaid, often involving a third party. Equity represents ownership interest in a property after subtracting any debts secured against it, rather than the property being used as security itself.