Announcing The Winner of Our Financial Literacy Scholarship (Spring 2022)
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Lenders are essentially taking a risk every time they approve someone for a loan; therefore anything that can mitigate at least part of that risk is a vital part of their business. This is where collateral comes in, it reduces the risk that a lender takes on and also any loss that might come from a borrower defaulting. Collateral is like insurance, it’s only there in case something happens. Lenders never want you to default and they aren’t interested in the collateral you’ve put up, they simply want you to make your payments on time and in full. When a borrower does default the process that a lender must go through in order to seize the asset is both costly and time-consuming. In a worst case scenario as the last resort, a lender will seize the asset but never without reason, don’t think that your lender is out to ruin your finances by suggesting you provide collateral.
When it comes to being approved for a loan it’s all about the risk, every lender has their own way of assessing risk based on credit history, credit scores, employment etc. If your potential lender finds that you are in fact a risky borrower you may be asked to put up some type of collateral to secure the loan.
It might seem like collateral is only beneficial to the lender but the borrower can also benefit from putting up some type of collateral to secure their loan.
A secured loan is a great financial tool, one that can provide you with an opportunity that might not be available to you otherwise. Collateral often gets a bad rap when in reality it’s a great way for lenders to provide their services to more people and for borrowers to get the money they need.
In order to get a secured loan, you must own (outright) something that can be used as collateral. The most common assets used are property and vehicles, but generally speaking, if you own something that has enough value you can use it as collateral, here are a few examples:
There are two types of vehicle loans that are available to you, either a loan from a bank or dealership that is used to purchase a vehicle or a title loan that is taken out against a vehicle you already own. These two types of loans are available for any kind of vehicle including cars, vans, boats, R.Vs, and classic or vintage cars that are valuable.
Loans with collateral aren’t only for personal use if you own a business you can use any of your business assets to obtain a loan to help with expenses. Here are a few of the business assets you can use as collateral:
Secured loans for businesses work similar to secured loans for personal use, you need to have an asset that is valuable and can be used as collateral. You’ll need to get in contact with the lender you work with as they’ll be able to tell you what options are available to you and your business.
Collateral is a great way to get the money you need without having to settle for less. It provides the security that your lender needs so you can get the loan you want. Always consider a secured loan before you give up, more often than not it offers the best solutions for everyone involved.
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