Really, a passport cannot be collateral either. This is the technical name of some physical object of value that the lender can sell on in order to get their money back. So, unless you borrow money from some crook, that option is not open in a perfect world. Although, yes, the passport can be held as an extortion tool, insofar as getting a new one issued poses a certain amount of inconvenience.
In this context, however, I am fine with 'collateral' even if the term is used rather loosely.
PS I remember 'pawning' my ID at the university library for books when I was a student. I was doing it with such regularity, that at a certain point I had become accustomed to living without it and was not even sure if I should go seek my collateral at the university library or the British Council one. Nor was I sure what exactly I should return in order to get it back. That situation changed only when my first son was about to be born and I really had to identify myself
Yes, it's definitely a non-technical usage of the word collateral. No one will want to buy your passport (generally). It doesn't have a standard resale value like a car. But it's fine like this in casual usage.