What is the collateral for a loan called?

The term used to describe the collateral for a loan is "security." In the context of loans and financing, security refers to an asset that is pledged as collateral to secure the repayment of the loan. If the borrower defaults on the loan, the lender has the right to take possession of the security to recover the outstanding loan amount. This concept is crucial in real estate transactions, where properties often serve as security for mortgage loans. Ensuring that both parties understand the nature of the security can help mitigate risk in the lending process.

While all the other terms mentioned—equity, collateral, and guarantee—may relate to financial transactions, they do not accurately define the specific role of a pledged asset in this context. Equity refers to the ownership value in a property after deducting any debts secured against it, collateral is a broader term that can refer to any asset used to secure loans, and a guarantee is a promise made by a third party to fulfill the obligation if the borrower fails to do so. Thus, "security" is the most precise term for the collateral specifically associated with a loan.