Collateral Security – This is generally defined as additional security borrower offers a lender to secure a loan. Banks may take some additional securities which are called collateral securities.
Collateral could be in the form of guarantee from one or two persons, assignment of life insurance policies, lien over shares, and units or other securities or mortgage of immovable property.
These additional securities are taken so that in case a loan is not paid back, recourse may be taken to such securities instead of depending upon the primary security alone.