What is collateral in SAP FS-CML - Loans Management?

SAP Term: collateral

• Component: FS-CML

• Component Name: Loans Management

• Description: An option that gives the lender the right to value the collateral and make a proportional claim on the yield. This occurs in the case of nonfulfilment of the loan contract by the borrower and the existence of further conditions. The collateral is assigned to one or several loan contracts.

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• Key Concepts: 
  Collateral is a type of security that is used to secure a loan or other financial obligation. In the context of SAP FS-CML Loans Management, collateral refers to any asset that can be used as a guarantee for a loan. This could include real estate, vehicles, stocks, bonds, or other assets. The collateral is held by the lender as a guarantee that the borrower will repay the loan. 
  
  How to use it: 
  In SAP FS-CML Loans Management, collateral can be used to secure a loan. When setting up a loan, the lender will specify the type of collateral that is required and the amount of collateral that must be provided. The borrower must then provide the required collateral in order to secure the loan. Once the collateral has been provided, it will be held by the lender until the loan is repaid in full. 
  
  Tips & Tricks: 
  When setting up a loan with collateral, it is important to ensure that the value of the collateral is sufficient to cover the amount of the loan. This will ensure that if the borrower defaults on their loan, the lender will be able to recover their losses by selling off the collateral. 
  
  Related Information: 
  SAP FS-CML Loans Management also allows lenders to set up loans without collateral. In this case, lenders may require borrowers to provide additional information such as credit history or income verification in order to secure a loan.