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2. What is a Pledging Collateral?

Pledging collateral means the borrower will come up with an asset that has a certain amount of value to qualify. For example, if the loan requires $25,000 in collateral, a vehicle worth $10,000 would not be sufficient. The other thing to keep in mind is that assets lose value over time, so the value of the asset may be more at the beginning of the loan than at the end of the loan. But, since the outstanding loan amount decreases over time as well, this may work out. The banker will evaluate each situation on a case by case basis.

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