What is collateral?


Nick Bendel

Nick Bendel

( 1 min read )

Collateral, or security, is an asset you agree to surrender to a lender if you fail to repay a loan. Generally, the collateral for a car loan is the car itself. So if you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.


Related FAQs

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

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