1. if loans, bonds etc are collateralized on particular assets of the borrower, the lender has the right to take these assets if the borrower fails to repay the loans etc:
• The company believes its credits are sufficiently collateralized to protect it from substantial losses.
• In an effort to get rid of $1.1 billion in troubled loans, First Boston is preparing to pool the loans into a package and sell them as collateralized bond obligations.
• Collateralised loan obligations are securities backed by claims on existing assets, in this case income from commercial leases.
2. in Asset-Backed Securities, income from lending is used to make interest payments on bonds that are collateralized on this lending. The money received from the bonds is often used to make more loans. The bonds are then traded on bond markets:
• $400 million of credit card certificates are collateralized with Visa and MasterCard receivables, sold by Norwest Bank Iowa.
Financial and business terms. 2012.