What are 'collateral backed loans'?

According to WebFinance, Inc.'s InvesterWords.com, the "biggest, best
investing glossary on the web", the definition of collateral is:
http://www.investorwords.com/cgi-bin/getword.cgi?929

"Assets pledged by a borrower to secure a loan or other credit, and
subject to seizure in the event of default."

Pledging is defined as:
http://www.investorwords.com/cgi-bin/getword.cgi?3716

"Offering assets to a lender as collateral for a loan."

Assets are defined as:
http://www.investorwords.com/cgi-bin/getword.cgi?273

"Any item of economic value owned by an individual ... especially that
which could be converted to cash. Examples are cash, ... a house, a
car, and other property."

So, a "collateral backed loan" would be a loan (money) that is secured
by something that has a cash value, such as a house, and if the loan is
not paid, the lender can potentially take possession of the property.


Search strategy:

collateral backed loan definition
://www.google.com/search?q=collateral+backed+loan+definition

If you have questions, feel free to ask!

Looking Forward, denco-ga

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Request for Answer Clarification by shoaib-ga on 16 Apr 2003 17:50 PDT

Hello denco-ga and please note that I am satisfied  with your answer
but please provide a little more clarification of your answer. You
have said that collateral based loans are those which are secured  by
the assets so therefore I want to say that it means that borrower can 
qualify for "greater than 100% loan-to-value loan" by using either the
collateral of the financial institution for above mentioned purpose or
by  using the collateral of borrower for the above mentioned purpose. 
Please provide 'clarification' of that mentioned statement. Thanks for
your help.

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Clarification of Answer by denco-ga on 16 Apr 2003 20:19 PDT

Howdy shoaib!

The traditional definition of a "collateral backed loan" does
not include a "greater than 100% loan-to-value loan" as the
loan is backed by the assets (collateral) of the borrower to
the value (or less) of the collateral and no more.

Loans that are "greater than 100% loan-to-value," such as the
110% type of equity loans that people get on houses, involve
things that offset the lender's exposure to default, including
fees, points, a bigger percentage rate, as well as the loan being
based on the equity that the borrower has in the house.

I hope this helps to clarify things.

Looking Forward, denco-ga