collateral
Also called: jaminan
An asset pledged to the bank, in a mortgage usually the house itself.
What it means
Collateral is an asset handed over by the debtor to the bank as security for debt repayment. In a mortgage, the collateral is generally the house being purchased itself. If the debtor fails to pay, the bank has the right to sell the collateral to cover the remaining obligation. Therefore, the legal status of the collateral must be clean and not currently pledged to another party.
Why it matters for families
Collateral makes banks willing to offer lower interest because their risk is smaller. However, a pledged house cannot be freely sold while the mortgage is not yet paid off. Families need to know that default leads to seizure and auction, not just a penalty. Understanding this helps families weigh their installment capacity before committing for decades.
Example
For example, a family takes a Rp450 million mortgage with the house as collateral. As long as the debt remains, the certificate is held by the bank and the house cannot be transferred without their approval. Once paid off, the bank returns the documents and removes the mortgage lien.
Common misunderstanding
Some people assume collateral is merely an administrative formality. In fact, collateral is real security that the bank can execute if installments are overdue for a prolonged period.