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How do collateral loans work?

The term “collateral” refers to any asset or property that a consumer promises to a lender as backup in exchange for a loan. Typically, collateral loan agreements let the lender take over the asset if the borrowers fail to repay the debt according to the contract. If you’re considering taking on a loan secured by a personal asset, it’s important to understand how collateral works.

Definition of Collateral

Collateral is something you own that the bank can take if you fail to pay off your debt or loan. This can be any item of value that is accepted as an alternate form of repayment in case of default. If loan payments are not made, assets can be seized and sold by banks. 

Volta Finance Limited (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.