The asset or assets that a borrower pledges in order to guarantee repayment of a loan is called as

Collateral is defined as an asset owned by a borrower—such as land, buildings, vehicles, or bank deposits—that is pledged to a lender as a guarantee until a loan is fully repaid [1]. It serves as a security interest, providing the lender with a legal right to seize and sell the asset to recoup the loan amount if the borrower defaults [1]. This mechanism transforms an unsecured debt into a secured loan, where the asset acts as a backup source of repayment [2]. Common examples include property titles and livestock [1]. While terms like 'security' are broader, 'collateral' specifically refers to the pledged asset of value used to safeguard the transaction [1]. In the banking system, collateral, interest rates, and documentation together form the 'terms of credit'.

Sources

1. [1] Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > TERMS OF CREDIT > p. 43
2. [2] https://www.investopedia.com/terms/c/collateral.asp