How would you give a domain as collateral?
Transfer it to the lender, or give the lender access to your registrar-account? (in that case, the lender will have to be sure you cannot recover your account).
Or probably give it to an escrow or something if that's all you have as collateral.
But then the same question remains... Will you actually do all the effort of transferring a domain for a $26 loan? I know i wouldn't take it...
I would take domain collateral for +$200 loans, if the domain was actually worth +$300, but i would not take a domain as collateral for a small loan, especially if i wasn't sure the domain was actually worth enough.
No offence OP, but if i understand correctly, your asking price is $499. This doesn't mean it's worth $499.
I've seen guys registering a domain (not even a good name), and trying to sell it for 10 times the registry fee just a couple days later.