What Is Collateral for a Mortgage?

When taking out a loan, lenders may look into your financial background and ask for a downpayment or collateral. Collateral is a form of guarantee for the lender that if the borrower does not make their payments, the lender can take possession of the collateral, such as the property for a mortgage loan. Secured loans, such as mortgages, usually come with more favourable terms than unsecured loans. However, the downside is that the collateral can be claimed by the lender if payments are not made.