After-Acquired Collateral

You are trying to get a loan, but you run into a problem. You don't have enough collateral. Collateral is stuff you own that you are going to use to guarantee the loan. Using collateral lets the lender feel better about giving you the money, because they know if you default, they will take your stuff instead.

However, in this case, you don't have enough stuff, and the bank would rather just keep its money.

You have a little extra you can offer, though. It turns out your uncle has decided to get rid of all his worldly possessions and join a cult. He plans to spend the rest of his life in a yurt in the New Mexican desert worshipping avocados. He has promised to give you his car, which would cover the amount of collateral the bank has asked for. Unfortunately for you, he can't move out to the desert until certain astrological conditions (that you frankly don't understand) come to pass. However, you need the money now. Like right now.

After-acquired collateral to the rescue!

After-acquired collateral is collateral used to back a loan that you don't actually have at the time the loan is signed. In real life, the crazy uncle scenario comes up only occasionally. More often, after-acquired collateral comes into play when the loan specifies that a debtor has backed a loan with all their property. It can also come up when someone comes into possession of meaningful property after some kind of relevant legal proceeding, such as a bankruptcy.