A valuable article or property pledged as the security for a loan. Land or buildings are used as collateral for a mortgage; share certificates or life insurance policies with a surrender value are used as collateral for bank loans; in pawnbroking the collateral pledged can be any portable valuable. If payments of interest and repayments of the principal are not made on time, in the last resort the lender can sell the collateral asset. This makes loans with collateral much safer for lenders than loans without collateral. When credit markets are imperfect, because of asymmetric information, individuals or firms who cannot offer collateral find it difficult and expensive to obtain loans.