Collateral Loan Clause Samples

A Collateral Loan clause establishes that a loan is secured by specific assets pledged by the borrower as collateral. In practice, this means that if the borrower defaults on the loan, the lender has the right to seize and sell the designated collateral to recover the outstanding debt. This clause typically applies to loans involving significant sums or higher risk, such as mortgages or business loans, where property, equipment, or other valuable assets are used as security. Its core function is to reduce the lender’s risk by providing a clear mechanism for recouping losses in the event of non-payment.