Collateral refers to:

Collateral refers to:

• A. Debts
• B. Net profits
• C. Equity
• D. Assets pledged to a lender until a loan is repaid

Answer: (D)

Collateral is assets pledged to secure a loan, serving as security for the lender. If you don’t repay, the lender can seize these assets to recover the owed amount. This setup reduces the lender’s risk and can influence loan terms, such as interest rate or required down payment. It’s not the debt itself, not profits, and not ownership in the asset. Debts are the obligations you owe, net profits are earnings after expenses, and equity is your ownership share of an asset after liabilities. Collateral specifically refers to the security tied to the loan.

Collateral is assets pledged to secure a loan, serving as security for the lender. If you don’t repay, the lender can seize these assets to recover the owed amount. This setup reduces the lender’s risk and can influence loan terms, such as interest rate or required down payment. It’s not the debt itself, not profits, and not ownership in the asset. Debts are the obligations you owe, net profits are earnings after expenses, and equity is your ownership share of an asset after liabilities. Collateral specifically refers to the security tied to the loan.