Investopedia: What is a 'Collateral Value'?

Collateral Value

What is a 'Collateral Value'

A collateral value is the estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal from a qualified expert. If publicly traded securities are being used, then the current price of the securities is the collateral value. However, marketable securities are subject to the margin requirement restrictions mandated by the Federal Reserve Board.
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BREAKING DOWN 'Collateral Value'

In most cases, the amount of the loan given will not exceed the collateral value of the assets, and will usually be less than its fair market value. This is because most lenders will assess collateral property at its fire-sale value and not its actual cost or current value. This is for both the borrower's and lender's protection.
Next Up Additional Collateral

    Collateral Value
    Additional Collateral
    Collateral
    Cross Collateralization
    Advance Rate
    After-Acquired Collateral
    Side Collateral
    Collateral Value Insurance
    Borrowing Power Of Securities
    Ineligible Accounts

Additional Collateral
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Additional assets put up as collateral by a borrower against debt obligations. Additional collateral is used to lessen the risk to the lender. Creditors might require extra collateral in order for a given loan to remain at a constant interest level, or to appease investors or a credit committee. Such collateral might include cash, certificates of deposit, equipment, stock or letters of credit.
BREAKING DOWN 'Additional Collateral'

Collateral is commonly used when securing loans as a way to increase the likelihood of repayment. If the borrower defaults on a loan, the lender would have the right to acquire the collateral in an attempt to pay off the remaining debt. If additional funds are lent, then more collateral might also be required.
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