How Can I Obtain a Collateral Loan?Steve Driz
There are many instances in one’s life where you might need a great deal of cash fast. You might be in some sort of emergency situation, or you might need the funds to start a business or some other personal enterprise.
If you have a¬†less than stellar credit score, securing a loan from a money lender can be difficult. It can be especially difficult if you need the money fast. Luckily, there are other options available out there if you need money now.
A collateral loan is a loan in which an object of significant value, such as a vehicle, classic/collector’s vehicle, equipment, etc. is left in the possession of the lender and serves as collateral for the money that you want to borrow. How can you secure such a loan and what else do you need to know? Read on for more information.
What Is a Collateral Loan?
There are many, many different ways to get a loan out there. The most common situation for loan seekers is to go to their bank. Banks and other financial institutions weigh the amount of risk when lending money to people.
A strong credit score from an individual gives the moneylender more confidence that they’ll see the money they lend back on time with interest. If you don’t have a strong credit score, you might need to take other steps to help money lenders feel confident in your case and lessen their amount of risk.
Borrowing money without any type of collateral is known as an unsecured loan, while a collateral loan is known as a secured loan.
Individuals can offer any type of property with high value as collateral for their loan. Vehicles, whether higher end or collectors/classic, construction equipment and other such high-value assets can help to secure money when you need it.
How does it work? Your collateral lessens the risk of the lender. You let the lender hold the collateral during the term of the loan and get it back once the loan has been paid in full. If you fail to pay back the loan, or make any alternative arrangements, the lender can sell the asset that you’ve offered as collateral. That means in extremely rare cases failure to pay means you may lose your pledged collateral. The lender will then sell the asset for the highest amount possible and use the proceeds to repay the loan, and give you any amount received that is higher than what is owed.
You also need to outright own these assets in order to borrow against them. But as long as you own a high-value asset, you can obtain a collateral loan. Assets should be easy to liquidate to count as a form of collateral. Vehicles, classic/collector vehicles, construction equipment are a great examples, while a rare china set may be less likely to be approved.
If you need money fast, there’s no more efficient way to get it than¬†a collateral loan.
Advantages of Collateral Loans
There are a number of reasons that individuals attempt to borrow against their vehicles, equipment or other assets.
The main reason is that you have a much higher chance of being approved when you apply for a collateral loan as compared to a traditional, unsecured one. If you need money fast, you might not have time to go through the application and waiting process for an unsecured loan, especially if you might just get rejected at the end of it all.
Since you’re reducing the lender’s sense of risk, you might also be able to secure a larger loan than you would if you were applying for an unsecured loan. Depending on how much money you need to borrow, this can be a huge advantage.
If your money is tied up in various hard-to-sell assets, borrowing against them can help you get liquid fast. Selling your car for cash, for example, can take a great deal of time and effort. Borrowing against it can get you the money you need at a much quicker pace.
Collateral loans also offer a great alternative to less-than-preferable forms of borrowing money. No one wants to have to¬†ask friends and family members¬†for money, but many feel as if they have to take this step after being turned away by traditional banking institutions.
There is a higher risk associated with collateral loans. But if you feel confident that you can pay back the money borrowed, they offer a perfect and convenient alternative to other lengthy and restrictive processes. You can find a collateral loan lender that can work for you to create an arrangement that works for both of you.
How to Secure Collateral Loans
If you have a car title or other asset ready to borrow against, what is your next step? There are a variety of money lenders who accept collateral offers in exchange for loans.
National banks and community banks will both offer such loans. If you’re already a member of a bank, you may prefer the familiarity and convenience of visiting your local branch. That being said, many people avoid going through banks because of the long wait times and restrictive business hours. If you need money fast, going through a bank can delay the process.
There are many online money lenders that accept collateral loans. With these lenders, you can apply online from the comfort of your own home. An online application usually only takes half an hour to complete and you can be approved at a much faster rate than that of a traditional bank.
Your Car Title as a Collateral Loan
Need money fast and want to borrow against your vehicle? The above information should give you the basics on what you need to know about obtaining a collateral loan. Have more questions?¬†Give us a call¬†and let us help.