The word ‘collateral’ is the word used to refer to something – a piece of property, perhaps – that you have turned in as security to stand in for a loan you took.
Now there are many possible reasons for which you might want to loan or borrow some money, but I am assuming you are a progressive person who is interested in building a better future for yourself than the one you have right now. That’s right, you only want to borrow money because you want to be able to return it; you know you can return it when you are putting the loan into something profitable, say a business venture. Otherwise, why would you want to put up something precious you’ve got as collateral for a loan you have no idea how you are going to pay back.
Collateral has got to be something of value to not only you, but also the lender of the loan. It could be a car, your home, your title deed to a piece of property. Anything of value. They would like to know that in the unfortunate instance that you are unable to pay back the loan, whatever you have laid down in its stead can sufficiently stand in for the money you borrowed. Chances are that they would hold on to it until you are able to pay back, or they sell it to make back their money.
You putting down the collateral have to be sure then that the loan you are borrowing can be paid back in within the time frame agreed between you the borrower and the lender. Presumably, you want to put the borrowed money into business that you are sure will yield something within the stipulated time. That means you must have a business plan that you must have some confidence in. In any case, the lender is not likely to loan you any funds if he is not reasonably convinced that you can pay it back, anyway. So you’ve got your work cut out for you.
Of course, it’s not all loans that require collateral. There are other types known as “Insecure” loans, where you get to pay more interest and you never even get as much money in the first place.
The previous type, the one that requires collateral, is known as a secure loan and if you have any confidence in your ability to pay back, it might be your best choice. But you want to consider your collateral.