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In a financial context, collateral specifically refers to items or assets that a borrower pledges to a lender as security for a loan. The primary purpose of collateral is to provide protection to the lender in case the borrower defaults on the loan. If the borrower fails to make repayments, the lender has the right to seize the collateral to recover some or all of the outstanding debt. Common types of collateral include real estate, vehicles, and financial assets such as stocks or bonds.
Knowing this, the other options do not accurately describe collateral. Unsecured personal loans, for instance, do not involve collateral and are based solely on the borrower's creditworthiness. Funds held in a savings account may be considered liquid assets but are not pledged against a specific loan, thus not qualifying as collateral for securing a loan. Lastly, while assets that cannot be liquidated exist, they are also not suitable as collateral because lenders require assets that can be readily seized and sold to recover funds in the event of default.