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====== Collateral ======

**Collateral** is **property pledged as security** for the repayment of a debt or performance of an obligation.

===== Key Characteristics =====
  * Protects the **lender**
  * Can be **real or personal property**
  * Allows lender to **seize or foreclose** if borrower defaults
  * Does **not transfer ownership** unless default occurs

===== Collateral in Real Estate =====
  * Real property is used as collateral for:
    * Mortgages
    * Deeds of trust
  * Secures a **promissory note**

===== Collateral vs Security Instrument =====
  * **Collateral**
    * The property pledged

  * **Security Instrument**
    * The legal document creating the lien
    * Examples: mortgage, deed of trust

===== Release of Collateral =====
  * Occurs when the debt is **paid in full**
  * Lien is removed by **reconveyance** or **satisfaction**

===== Exam Tip =====
  * Collateral is **pledged**, not sold
  * In real estate, the **property itself** is the collateral