Collateral is kind of pledging you need to take for the security of your lending money in the case of your borrower fails to repay.

1. Collateral needs to be more value than loan money. Usual practice 80% loan will be eligible on collateral value.
2. After lapse of repayment date, you will have all the rights to sell the collateral to cover your offered loan.
3. There are different types of collateral you may prefer to accept, usually established altcoins would be a better choice.

There might be many other aspects of collateral will be possible, I guess you will learn them practically over time.