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Collateralization Ratio

A collateralization ratio compares the value of collateral with the value of the debt or obligation it supports. For example, $150 of collateral supporting a $100 loan represents a collateralization ratio of 150%.

Why it matters to you

The ratio helps show how much collateral exists relative to the amount borrowed. If the value of the collateral falls, the ratio also falls and may eventually trigger additional collateral requirements or liquidation depending on the loan structure.

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