A collateral loan is a type of loan where the borrower offers an asset, known as collateral, to secure the loan. This means that 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. These loans typically have lower interest rates compared to unsecured loans because the lender has less risk. Borrowers can use collateral loans for various purposes, such as financing a home, purchasing a car, or consolidating debt.