Side Collateral

Pledge of assets or deposits that does not fully collateralize a loan. A lender making a $5,000 commercial loan may place a hold on $1,000 in marketable securities. Personal guarantees, such as a promise not to mortgage or sell property owned by the borrower, also are a form of side collateral and are worth only as much as the character of the borrower. Side collateral rarely is taken in consumer credit arrangements.