Collateral refers to an asset that a borrower offers to a lender to secure a loan. If the borrower fails to repay the loan, the lender has the right to take the collateral to recover their losses. Common forms of collateral include property, vehicles, or savings accounts. Using collateral can help borrowers obtain loans more easily, as it reduces the lender's risk. Lenders may offer better interest rates or larger loan amounts when collateral is involved. This practice is common in various types of loans, including mortgages and auto loans.