Collateral
An asset pledged to secure a loan, which the lender can claim if you fail to repay.
Collateral is property, often a home, car, or savings, that backs a loan and reduces the lender's risk. Secured loans like mortgages and car loans usually carry lower interest rates precisely because collateral protects the lender. If you default, the lender can seize and sell the pledged asset to recover what it is owed. Borrowing against collateral can unlock cheaper credit, but it puts the asset directly at risk. Knowing exactly what you have pledged is essential before signing any secured loan.
Example
A mortgage uses your home as collateral; miss enough payments and the bank can foreclose and sell it to recover the outstanding balance.
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Related terms
Mortgage
A long-term loan secured by real property, used to finance the purchase of a home or investment property, typically repaid over 15–30 years.
Creditworthiness
A lender's assessment of how likely you are to repay borrowed money, based on income, debts, and payment history.
LTV (Loan-to-Value Ratio)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage. Lower LTV means less risk for the lender.
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Transaction Categorization
The process of classifying financial transactions into categories like groceries, rent, or entertainment to analyze spending patterns.
Recurring Transactions
Transactions that repeat at regular intervals — subscriptions, loan payments, salary deposits — essential for predicting future cash flow.
Bank Synchronization
The automated process of importing transactions from bank accounts into a financial management tool, either through API connections or file imports.
APR (Annual Percentage Rate)
The annualized cost of borrowing expressed as a percentage, including interest and mandatory fees, used to compare loan products.
Interest Rate
The percentage charged on borrowed money or earned on deposited/invested money, expressed as an annual rate.
IBAN
International Bank Account Number, a standardized format for identifying bank accounts across borders.