Collateral is an important variable when looking at a new loan. This is important when discussing the

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Collateral is an important variable when looking at a new loan. This is important when discussing the debt ratio. We start with our assets and then we compare it to how much debt we already have. It is likely that the assets are already serving as collateral for existing debt. So, anyone lending new debt is going to be second in line to those existing debtors. So, they have to make sure there is enough collateral to go around on a new loan!