This paper explores costs and proceeds from loan collateral in credit market with ex ante asymmetric information when collateral value and the probablity of project success fluctuate. A borrower is willing to pledge collateral if (i) its future value is correlated with the probability of project success, or (ii) its value fluctuates strongly, or (iii) its funded with loan capital. When one of the conditions is satiefied, in constrast to Bester (1985), a high-risk borrower may be more willing to pledge collateral than a low-risk borrower. The paper is related to topical subprime crises and real estate collateral.