Definition

Verb: 1. To pledge an asset as security for a loan: To use property or another valuable asset as collateral to guarantee repayment of a borrowed sum. If the borrower fails to repay, the lender can take possession of the pledged asset. 2. To secure a debt or obligation with collateral: The act of providing a lender with a lien on an asset to reduce the risk associated with lending.

Usage

The verb "collateralize" is used in financial and legal contexts. It is typically followed by the object being pledged (e.g., "collateralize a loan") or the means of securing it (e.g., "collateralize with bonds"). * The object of the verb is usually the loan or debt being secured. * The means of securing it is often expressed using the preposition "by" or "with."

Examples

• To secure a loan:
• Passive voice construction:
• As referenced:

Advanced Usage

• Financial Engineering: In complex finance, pools of assets (like mortgages or loans) can be collateralized to back new securities, such as Collateralized Debt Obligations (CDOs).
  • The bank collateralized the portfolio of auto loans to issue new bonds.

Variants and Related Words

• Collateral (n): The asset pledged as security.
  • They used their home as collateral for the business loan.
• Collateralization (n): The process or state of being collateralized.
  • The collateralization of the debt made the loan less risky for the lender.

Synonyms

• Secure: To make (a loan) safe by providing assurance against failure to repay.
• Pledge: To formally promise or give as a guarantee.
• Hypothecate (formal/legal): To pledge property as security without transferring title or possession.

Antonyms

• Unsecured: (adj) Denoting a loan not protected by collateral.
  • An unsecured personal loan typically has a higher interest rate.

Related Financial Terms (Not Phrasal Verbs)

• Securitize: To pool various financial assets and sell the repackaged shares to investors. While related, "securitize" often involves a broader process that may include collateralization as a step.
• Lien: The legal right to keep possession of property belonging to another person until a debt owed by that person is discharged. Collateralizing an asset often grants the lender a lien.

Verb

1. pledge as a collateral
   • The loan was collateralized by government bonds