What does collateral mean?
Collateral functions primarily as a noun meaning property or other assets that a borrower pledges to a lender as security for a loan. If the borrower fails to repay, the lender has the right to seize the collateral — typically real estate, vehicles, securities, or savings. In this role the word belongs largely to formal financial and legal language: banks 'accept', 'require', or 'hold' collateral, and borrowers are said to 'put up' or 'pledge' it. As an adjective, collateral describes something additional yet subordinate or incidental, most famously in 'collateral damage', a term for unintended harm inflicted on bystanders during military action. It can also denote relatives connected through a common ancestor rather than a direct line of descent, as in 'a collateral descendant'. Derived from Latin roots meaning 'bound together alongside', the word conveys the idea of something tied to another thing as a companion or safeguard. Its dual character — reassuring in lending, sobering in warfare — makes it one of English's more context-sensitive terms.
Property or other assets pledged by a borrower to a lender as security for a loan, to be seized if repayments are not made.
"The lender required the equipment itself to serve as collateral."
Most common in banking, finance, and legal contexts.
A relative descended from the same ancestor but outside the direct line of descent.
"The estate passed to a collateral branch of the family."
Chiefly used in legal and genealogical writing.
Additional but subordinate; accompanying or secondary.
"The report noted several collateral benefits of the new policy."
Occurring alongside something else, especially as an unintended accompaniment, as in 'collateral damage'.
"Officials acknowledged collateral casualties in the operation."
Rarely pluralized; 'collateral' is normally treated as an uncountable mass noun in financial contexts. When a plural form appears at all, it is usually in legal drafting referring to multiple distinct pledged assets, where listing each item individually is preferred.
"The security agreement enumerated all collaterals pledged under the facility."
The word for the house you risk losing on a loan literally comes from Latin for 'glued together' — because it's bound side-by-side with the debt itself.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of collateral
Collateral derives from medieval Latin 'collateralis', from 'com-' ('together with') and 'latus' (stem 'lat-'), meaning 'side', so it literally signifies 'situated alongside' or 'bound together with'. It entered English in the late Middle Ages, around the 14th–15th centuries, initially in the adjective senses of 'parallel' or 'accompanying'. The financial noun sense developed later in English law and commerce, while the phrase 'collateral damage' gained wide currency during 20th-century military conflicts. Cognates sharing the Latin root 'latus' include 'collate', 'collation', and words borrowed via related Romance forms such as 'relegate' and 'delegate'.
Related word forms
How collateral is actually used
In everyday use, 'collateral' is most common in financial contexts, where it carries a neutral-to-formal register. The adjective sense in 'collateral damage' has become a well-known euphemism in military reporting. In legal and genealogical writing, 'collateral' also describes relatives who are not direct ancestors or descendants.
Easily confused with collateral
'Collate' is a verb meaning to collect and arrange pages or documents in order, while 'collateral' is a noun or adjective relating to pledged assets or something secondary and accompanying.