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collateral loans

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willsondany
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collateral loans  Reply with quote  

Can someone tell me what is collateral loans?
Post Mon Aug 06, 2012 6:49 am
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Wino
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Re: collateral loans  Reply with quote  

quote:
Originally posted by willsondany
Can someone tell me what is collateral loans?


When you borrow money and give the lender an interest in some tangible property that can be seized if you fail to perform according to the lending terms.

For example, I can borrow $10 from my friend for a week, and use my $100 wrist watch as "collateral." If, in a week, I do not pay back the $10, the friend is able to take the watch as his own.

Pawn shops are an example of businesses that loan money on collateral. In that case, you surrender the collateral to the pawn shop, and when you honor the payment terms, they return the collateral to you. If you do not honor the terms, the shop can sell the item according to the terms you signed when the loan was made.
Post Mon Aug 06, 2012 7:42 am
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willsondany
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Our property stands as security for the debt? Right?
Post Mon Aug 13, 2012 8:57 am
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Wino
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Yes. Anything with value can be used as collateral. Note that "value" is a vague term as illustrated by the adage: "One man's trash is another man's treasure."

When you purchase a car, the car itself is the collateral, and can be "repossessed" if you do not honor the payment terms. It is the same with real estate and foreclosures. The pawn shop example is a third major type of collateralized loan.
Post Mon Aug 13, 2012 9:54 am
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Tylertim
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Collateral loan is a loan where the loan borrower puts up an asset like house, cars, land etc.. for the loan. If the borrower unable to pay the loan amount over a period of time, the lender will have the right to possession of that asset legally. If you are able to pay the loan amount within loan period, there is no problem to you, otherwise you will face some risk from lender.
Post Sun Aug 26, 2012 11:40 am
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rajsidharth
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I think this is not the best way for getting loans. In a stage we are not able to pay the debit we will loose our property.
Post Mon Sep 17, 2012 5:06 pm
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soybean
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quote:
Originally posted by rajsidharth
I think this is not the best way for getting loans. In a stage we are not able to pay the debit we will loose our property.
Well, usually you don't have a choice with home and car loans. The reason is quite obvious for a home loan and almost equally obvious for car loans. Keep in mind that, if you were able to get a car loan without collateral, the interest rate would probably much higher than on a secured (by using the car as collateral) car loan because the lender would be taking a much greater risk than with a secured loan.
Post Fri Sep 21, 2012 6:24 pm
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frankydev
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Becoming a middle man and make collateral loans good or bad idea?
Post Mon Sep 24, 2012 11:33 am
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BillyQuinones
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A collateral loan is a loan that is secured by some personal assets which you will commit and give up if you fail in loan repayments. Once you sign the loan docs, you are stating to the loan provider that you promise to repay the loan. However, if you are failed to keep your promises, they can take the personal asset which is associated with the loan. Quite normally, the collateral needs to have the exact same value of the loan amount which you are borrowing from the lender. It is also called as secured loan.
Post Fri Mar 01, 2013 11:37 am
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soybean
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quote:
Originally posted by BillyQuinones
Quite normally, the collateral needs to have the exact same value of the loan amount which you are borrowing from the lender. It is also called as secured loan.
Rarely will the collateral have "the exact same value of the loan amount". But, it will usually be of high enough value to protect the lender to nearly the full, if not all of the, amount of unpaid debt from the debtor. If the collateral's value exceeds to the value of unpaid debt, the creditor is not entitled to keep more than the amount needed to recover the unpaid debt and any legal costs incurred in recovering the unpaid debt.
Post Mon Mar 25, 2013 7:54 pm
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