An asset that a lender accepts as security for a loan is called ____

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Detailed Solution

An asset that a lender accepts as security for a loan is called Collateral.
Collateral may take the shape of real estate or other assets, depending on the loan's intended use. It serves the purpose of being insurance for the lender. In other words, the lender may sell the collateral to recoup all or a portion of its losses if the borrower defaults on a loan payment. It helps to make sure the borrower keeps their end of the bargain. The lender has the authority to seize the collateral, sell it, and use the revenues to pay down the loan's remaining balance if the borrower does fall behind on payments.

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