As a noun, collateral is something of value pledged as security for a loan, which can be taken if the loan isn’t repaid. As an adjective, it can also mean secondary but related, as in “collateral damage.”
It comes from Medieval Latin “collateralis,” from “com-” (together) and “lateralis” (side), meaning “side by side.” The financial sense developed from the idea of something placed alongside a loan as extra security.
“Collateral damage” literally means side damage—harm that happens alongside the main target. The same side‑by‑side idea explains collateral in finance: it’s value parked next to your promise, just in case.
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