The Use of Collateral in Financial Transactions
Saso Kraner LL.M., Columbia Law School, 2015 Where collateral secures a contractual claim, a right in rem is created. This means it is not only enforceable between the parties to the loan agreement, but also against third parties. The purpose of a collateral arrangement is to protect the collateral taker against default risk relating to the collateral giver. In the event of default, the collateral taker can satisfy her claims using the delivered collateral. Collateral is used in different kinds of transactions. This post focuses on its use in financial transactions.