A collateral assignment agreement is a sort of legal contract signed between a money lending institution like a bank or a finance organization and a debtor, where in lieu of the loan the debtor is required to assign the rights of the collateral, that is, any valuable security asset, to the lending party. These collateral assignment rights establish that till the time the loan is being repaid within the loan repayment schedule, the collateral is not the sole property of the debtor.
Although the debtor retains its possession but it cannot be disposed of without the consent of the lending party. This collateral acts as the security for the loan and gives the right of liquefying the collateral to the lending party in case the debt is not fully paid back within the scheduled period. The terms and conditions pertaining to the collateral assignment vary as per the rules of the state where this loan and collateral assignment is taking place.
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