Tag Archives: security
Common Questions About Using Collateral On a Loan
Using collateral on a loan is the easiest way to get yourself approved and get yourself a great interest rate, especially when compared with unsecured financing options. But how does it all work? This can be overwhelming and confusing, but it certainly doesn’t have to be. These common questions cover basic things you’re going to want to know before you start diving into the world of financing.
What is collateral? Collateral is the security you promise to your lender. It’s saying to them that if you fail to make your monthly payments, they have this as security that they can repossess to cover their losses.
What is a secured loan? This is where you offer up some form of collateral. In unsecured financing there is none. In this type of loan your property can be repossessed if you don’t make your payments each month. By having this type of security the lender feels safer, that there is less risk, in lending to you. When there is less risk lending to you companies are more likely to approve your application and are more interested in working with you.
What can you use for collateral? The short answer is anything, but the longer answer is that every company sets their own standards. Banks will mostly only work with real estate and this is the most common form of security. However this is not the only type. The second most common option is a vehicle. It’s fairly easy to find a good number of lenders who will work with a car as collateral. Less common, but still out there, are those who will work with high priced items, like collectibles or jewelry.
Can I keep using my property while it’s being used as collateral? That depends on the item being used. When you are doing real estate or a car, then you can go on using your item as normal. With other high priced collectible items, however, lenders will often hold the item until you have finished making all of your payments.
Why would I want to do this? While there is certainly unsecured financing out there, using collateral makes it a lot easier to get approval. This is important if you have something like bad credit in your history. There are more benefits beyond that, however. By making the lender feel safer that you will repay things, and taking the risk off of them, they are more happy to work with you on things like the amount of your monthly payments, and most importantly, your interest rate. Secured financing is going to have the best interest rates available for you.
How To Get Accepted For A Personal Loan?
A personal loan is a loan that you can get for any particular reason. You can do with the money whatever you want. Whether you want it to consolidate your debts, buy a new car, fix up the house, or take a trip – that is up to you to decide. Here are some things you need to know about how to get a personal loan.
Two Kinds
Personal loans come in basically two forms – secured and unsecured. The secured form of a personal loan means, like most loans, that you could lose the item if you do not make the payments. Security is usually in the form of a house, but a car will usually work, too, for a smaller loan. Having security for a loan will usually mean that you can get a larger loan and a much better rate of interest. This is the best kind of personal loan to get.
An unsecured loan means that you give nothing in the form of security for the loan. Since it also means a greater risk to the lender, this type of loan usually means higher interest rates, and a shorter time for repayment.
What Is Needed
In order to qualify for this type of loan you will need a couple of things. The lender is not going to loan money to anybody who walks in off the street. So, besides the usual identification requirements, you will need proof of employment like a recent paystub, and a rather good credit rating – in most cases.
Now, however, quite a few lending institutions are giving out money even to people with bad credit. Some, even offer in their advertising to extend credit to those with bad credit – and without a credit check! You can be sure, though, that the interest rates are high, and that this type of loan is probably not in your best interest. Many lending institutions do not offer this type of loan because of the risk involved.
Be Sure To Compare
When getting your personal loan be sure to take the time to see what a few other companies might offer you. You can do this very easily over the Internet. You will want to compare not only the interest rates and size of the payments, but also any other features the loan may have. Also, be sure that you can pay the personal loan off early, if possible, and have a reduction in interest (some loans do not allow this – such as a payday loan). In order to properly understand what you will be paying, you may want to compare it to a secured loan, too, if you are thinking about getting an unsecured loan and you will see quite a difference.
Use It To Better Your Credit Rating
A personal loan will effect your credit rating, too. So, if your credit is not in the best of shape, you can improve your rating by how well you pay off this one. Ideally, you will want to make every payment on time, and for the full amount of the payment. If possible, add a little extra to each one, too, in order to get it paid off early.