What is typically required as 'Collateral' for a loan?

Collateral is typically defined as an asset that a borrower offers to a lender to secure a loan. This asset acts as a form of protection for the lender in case the borrower defaults on the loan. By providing collateral, the borrower assures the lender that there is tangible value backing the loan, which helps to reduce the risk associated with lending. Common examples of collateral include real estate, vehicles, or savings accounts, which can be liquidated or claimed by the lender if the borrower fails to meet the repayment obligations.

The other choices involve different aspects of the loan process. While a co-signer may help a borrower who has poor credit obtain a loan, they do not serve as physical security for the loan itself. A credit score evaluation helps lenders assess the borrower's creditworthiness but is not an asset. Similarly, a payment plan outline is a structure for repayment but does not represent collateral. The nature of collateral is specifically tied to physical or tangible assets that provide security for the lender.