Collateral power refers to the authority granted to a lender to take possession of and sell a borrower’s property in the event of default on a loan. This power is typically outlined in a collateral agreement or security agreement and gives the lender the right to use the collateral to recoup any losses from the defaulted loan. It is important for both parties to clearly understand the terms and conditions of collateral power to avoid any potential disputes in the future.
Collateral power refers to the authority or right granted to a lender to take possession of and sell a borrower’s assets (known as collateral) in the event of default on a loan or debt.
Various types of assets can be used as collateral, including real estate, vehicles, equipment, inventory, accounts receivable, and even intellectual property rights.
Yes, collateral power can be waived or modified through a written agreement between the lender and borrower. However, such modifications typically require the consent of both parties.
If a borrower defaults on a loan with collateral power, the lender can exercise its right to take possession of the collateral and sell it to recover the outstanding debt. The proceeds from the sale are used to satisfy the debt, and any remaining amount is returned to the borrower.
No, a lender must sell the collateral in a commercially reasonable manner. This means that the lender must make reasonable efforts to obtain the best price possible for the collateral, considering market conditions and other relevant factors.
In some cases, a borrower may have the opportunity to reclaim the collateral after default by paying off the outstanding debt, including any additional costs incurred by the lender. However, this option may be subject to specific terms outlined in the loan agreement.
In most cases, a borrower cannot use collateral for other purposes while it is pledged as security for a loan. The borrower must maintain the collateral in good condition and not encumber it with additional liens or claims.
In some cases, a borrower may be allowed to substitute collateral during the loan term with the lender’s consent. However, this is typically subject to specific conditions outlined in the loan agreement.
Collateral power can be challenged in court if there are allegations of fraud, misrepresentation, or other legal issues surrounding the loan agreement. However, the outcome will depend on the specific facts and circumstances of the case.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 5th April 2024.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
- Page URL:https://dlssolicitors.com/define/collateral-power/
- Modern Language Association (MLA):Collateral Power. dlssolicitors.com. DLS Solicitors. May 09 2024 https://dlssolicitors.com/define/collateral-power/.
- Chicago Manual of Style (CMS):Collateral Power. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/collateral-power/ (accessed: May 09 2024).
- American Psychological Association (APA):Collateral Power. dlssolicitors.com. Retrieved May 09 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/collateral-power/
Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.
All author posts