September 19, 2025One-Minute Reads: What Does Collateral Mean? 

When you hear the term collateral in the world of lending, it’s simply something valuable you pledge to a lender to secure a loan. Think of it as the lender’s safety net—if you can’t repay the loan, they can use the collateral to recover the money they lent you. 

Collateral can be many things, depending on the type of loan: 

• Auto loan: the car you’re buying is the collateral. 
• Mortgage: the home itself serves as the collateral. 
• Secured personal loan: items like a savings account, share certificate, or other valuable assets can be used. 

Using collateral can work in your favor—it often allows you to borrow larger amounts or get a lower interest rate compared to an unsecured loan. 

At PEFCU, we offer both secured and unsecured loans, so you can choose what works best for you. If you’re curious about how collateral might help you qualify for the loan you need, our team is happy to guide you through the options. Click here to see our current rates.