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A safety net used by lenders to make sure that they get their money back even if the borrower defaults. For example, a lender may use a car to collateralize a car loan. If the borrower stops making car payments, the lender can seize the car and sell it to cover its losses.

Mortgage lenders secure loans against real estate. If the borrower stops making payments, the lender can repossess the collateral property in a process called foreclosure.