So, what’s the point of collateral? A word that rarely gets an airing today yet its as important now as it’s ever been: perhaps. When I secured my first mortgage debt in 1978 the collateral was understood to be the promised value of property guaranteed to my bank in the event of default. This is the classic ‘secured’ loan: in small print terms – your home may be at risk etc. Credit card or car loan interest on borrowing is usually much higher than a mortgage purely because there is no collateral given as a guarantee of return: ‘unsecured’ loan. How many times have you read or heard the small print: ’according to status’. When did you last read the ‘small print’? However, should ones status detrimentally change or one were to default on the repayment of money owed to a bank via a credit card, they can apply for a charging order to attach the loan value to a property ensuring that the loan is repaid on the eventual sale. No matter how reasonable this may sound: after all, a loan is a loan: it occurred to me that this is somewhat of a double standard: financial institutions wanting their cake – and eating it too. The credit card companies get to attach a higher interest to the card repayments even in the knowledge that collateral will minimise their risk. This is hardly ‘unsecured’, which leaves me wondering why the cost of credit should be so high once collateral ‘worthiness’ has been established. Mind you, if your relationship with a lender goes as far as a CCJ or CO, the credit reference agencies will ensure your borrowing power is decisively curtailed. It’s difficult to buy a new fridge using ones collateral. Anyway, would one seriously sell ones home to pay off a credit card debt of £5000? I don’t think so.