The tourists' daring declaration set Pakistan just 343 runs to win on a very flat surface, having scored 264 runs in just 35.5 overs in their own second innings at a run rate of more than 7.5 an over.
At the close the hosts were 80 for two, with Imam-ul-Haq - who will be looking to add to his first-innings century - unbeaten on 43.
Under Ben Stokes and Brendon McCullum, England have repeatedly stressed their desire to become entertainers and get results rather than draws, an approach which was epitomised by their efforts to score as quickly as possible in their second innings on the afternoon of day four.
The declaration has significantly reduced the likelihood of the match finishing in a draw and Collingwood believes Stokes' bold approach in Rawalpindi is part of the bigger picture.
The England assistant coach said: "It's exciting, isn't it? On a pitch that's been pretty docile and slow, and to be in a position now to watch a game that's exciting tomorrow, it's going to be great for everyone.
"The bigger picture of what they (McCullum and Stokes) want is Test cricket to be entertaining and the way we have forced the game has got us a Test match tomorrow that everyone wants to watch.
"I'm looking forward to our guys going out there and eking out another seven wickets to go on and win the Test match. We are confident we can do it. The boys have shown they are willing to come up with different plans to take wickets out there and it is going to be an exciting day.
"It has been pretty clear right from the start we are willing to lose games for the sake of putting ourselves in the position to win them.
"Some might say it is an early declaration. We will see tomorrow if it is or if it is a really good declaration. We are not scared of losing, which is a good position to be in. It takes the consequences away from the players and how we want to go about things. Tomorrow, hopefully, we can get on the right side and get a win."
Pakistan were two wickets down after England's tactics with the short-ball appeared to pay off slightly, with Babar Azam making just four runs before edging behind, and Abdullah Shafique hitting Ollie Robinson to deep square leg.
Azhar Ali was then forced to return to the dressing from after retiring hurt following a blow to the top of his right index finger. It remains to be seen whether the batter will recover in time to feature on the final day.
England's unconventional batting approach was epitomised by Joe Root, who briefly switched to batting left-handed for two balls during his innings in an attempt to disrupt the bowler but was almost caught at conventional point-turned-square-leg before reverting to his usual stance.
However, Collingwood said Root's decision to switch was not entirely random.
"He does (bat left-handed) sometimes. He looks better batting left-handed than I do right!" he joked.
"He has some skill if you can go out and bat left-handed in a Test match. We are just trying ways to go against convention and put the opposition under pressure.
"If he feels the leg spinner is going into the rough and it will be better batting left-handed then go for it."