5 Examples of Collateral for a Secured Loan

A secured loan is one of the easiest and least risky financial assistance programs out there. A lot of companies offer this type of loan to almost all levels of lenders. And that is because of the collateral.

Unlike an unsecured loan, a secured loan requires collateral which is an asset or property that a borrower provides the lender as a security for the loan. To get your loan approved, you must present these assets of the same value should you fail to pay the money you owed. This way, the lender is assured that whatever happens, the money they lent to you will be returned and compensated.

Before committing to these loans, however, you need to be aware of the risk on your side. When you give the financing company the right to your assets, you are also giving them the right to seize your possessions.

So, what are the common types of collaterals banks and lenders usually accept?

1. Property

The term property includes real estate, personal assets, cars, motorcycles, and the likes. They are the most common collaterals that borrowers usually put up against a loan. Not only do they have high value but they are also easy to sell and have a lower risk for depreciation, especially in real estate.

On the other hand, Global Dominion’s Sangla OR/CR offers a reliable and easy-to-process car collateral loan program. If you’re in dire need of cash and you have a private vehicle, you can avail of this financial assistance. All you need to do is submit your car’s Certificate of Registration (CR) and its Official Receipt (OR).

2. Equipment

When you’re running a business, you can put up the equipment you use for your operations as collateral. This is especially useful when you’re applying for a collateral loan to add extra capital to your business. You may have to provide the official receipts of this equipment in order for the lender to assess its value.

3. Cash Security

As ironic as it sounds, borrowers can also use cash as collateral for a loan. How this works is you simply need to apply for a loan at the bank where you’re maintaining an active account. It means you’re giving the bank rights to your deposits and could arrange to automatically deduct your monthly payment from the account.

4. Inventory and Invoice Financing

This is especially useful for businesses that can give the lender rights to their inventory or future payments from their invoices as collateral. Should the borrower fail to pay the loaned amount, the lender could seize the inventory and sell them to pay off the debt.

5. Blanket Liens

The last type of collateral is blanket liens. As the Corporate Financial Institute defines it, a lien is a legal term that means the right of the financing company or lender to dispose of any assets a business or individual has should it default its loan.

A collateral loan is a good way for you to get money fast but you also have to be aware of the risk. Once you fail to pay on time, the lender can seize your properties or other types of collateral and may put you in much deeper financial stress. Make sure you think it through: whether you really need the loan or not and which one from the examples of collateral should you put at risk in case of payment failure.