collateralize: meaning, definition, pronunciation and examples
C1Formal, Financial
Quick answer
What does “collateralize” mean?
To use an asset as security for a loan.
Audio
Pronunciation
Definition
Meaning and Definition
To use an asset as security for a loan.
To pledge property or assets as a guarantee for the repayment of a loan; to back a financial obligation with collateral.
Dialectal Variation
British vs American Usage
Differences
No significant differences in meaning or usage. Spelling follows standard '-ize' (UK Oxford style) vs. '-ize' (US) patterns; '-ise' variant exists but is less common for this word.
Connotations
Neutral financial/legal term in both varieties.
Frequency
Slightly more common in American English due to the larger volume of financial literature, but standard in UK finance.
Grammar
How to Use “collateralize” in a Sentence
Subject (lender/borrower) + collateralize + Object (asset/loan)Object (loan) + be + collateralized + with + Object (asset)Vocabulary
Collocations
Examples
Examples of “collateralize” in a Sentence
verb
British English
- The borrower agreed to collateralise the debt with their investment portfolio.
- Banks often require small businesses to collateralise their loans fully.
American English
- They decided to collateralize the loan with their commercial real estate.
- The fund collateralizes its obligations with highly-rated bonds.
adverb
British English
- No standard adverbial form in use.
American English
- No standard adverbial form in use.
adjective
British English
- The collateralised loan obligation was sold to investors.
- A fully collateralised position reduces risk.
American English
- The collateralized debt obligation (CDO) market grew rapidly.
- They held a collateralized deposit.
Usage
Meaning in Context
Business
The company will collateralize its factory to obtain the necessary capital.
Academic
The paper examines how banks collateralize mortgage-backed securities.
Everyday
Rarely used; 'use as security' or 'put up as guarantee' are more common.
Technical
The CLO is collateralized by a diversified pool of leveraged loans.
Watch out
Common Mistakes When Using “collateralize”
- Using 'collateral' as a verb (incorrect: 'We will collateral the loan'; correct: 'We will collateralize the loan').
- Confusing 'collateralize' with 'capitalize'.
FAQ
Frequently Asked Questions
Primarily yes, but it can extend to any financial obligation (e.g., derivatives, bonds) where assets are pledged as security.
'Collateralization' (US) or 'Collateralisation' (UK).
Yes, a borrower (person or entity) collateralizes assets when securing a loan.
In general use, they are synonyms. In strict legal contexts, 'hypothecate' can imply a specific type of pledge without transferring possession, but in finance they are often used interchangeably.
To use an asset as security for a loan.
Collateralize is usually formal, financial in register.
Collateralize: in British English it is pronounced /kəˈlæt.ər.əl.aɪz/, and in American English it is pronounced /kəˈlæt̬.ɚ.əl.aɪz/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “No common idioms”
Learning
Memory Aids
Mnemonic
Think: COLLATERAL-IZE. To make an asset INTO collateral.
Conceptual Metaphor
ASSETS ARE SHIELDS (they protect/secure the loan).
Practice
Quiz
What does it mean to 'collateralize a loan'?