What are the assets pledged to a lender to secure or support a loan?

• A. Security
• B. Capital
• C. Guarantee
• D. Collateral

Answer: (D)

Collateral is the assets a borrower pledges to a lender to secure a loan. By putting something of value up as security, the borrower gives the lender a claim on that asset if they can’t repay. This reduces the lender’s risk and often helps the borrower obtain better loan terms. Examples include a house for a mortgage, equipment for a business loan, or inventory.

Capital refers to the funds or net worth a business has, not the pledged asset. A guarantee is a promise by a third party to pay if the borrower defaults, not an asset tied to the loan. Security can be used loosely to mean collateral in some contexts, but the precise term for the pledged asset itself is collateral.