Because you might not want to sell what you are putting forth as collateral.
E.g. You have ETH but need BTC for something. You could sell your ETH for BTC, but since you believe ETH will go up in price, you just use it as collateral for a BTC loan. You'll get your ETH back after you do whatever it is you need to do and you return the BTC to the lender.
In addition to it, I would suggest the OP to read this topic as well for a clear idea about collateral.
https://bitcointalk.org/index.php?topic=577765.0 <=== [EDU] The Rule of "No Collateral, No Loan" - IGNORE AT YOUR OWN RISK!