Collateral – securing credit in practice

It is not uncommon in everyday banking life that a loan has to be secured – this can have several reasons. It is possible, for example, that the borrower’s creditworthiness does not appear to be sufficient for a loan to be approved.

It is equally conceivable, or at the same time applicable, that the bank would like to minimize the risk of default due to the amount of the loan and that it will be necessary to provide loan collateral accordingly. What sounds rather bloated in theory is actually relatively easy to understand in practice.

Properties of the collateral

Properties of the collateral

It is of course important for the banks that they can actually use the respective collateral, because otherwise they are not really useful as collateral for loans. One of the main requirements that banks place on collateral is that the collateral can be converted into money quickly and easily – for example, without having to remove legal obstacles.

It is also important that the loan collateral does not fluctuate significantly or not at all in value – this applies in particular to the duration of the loan term, whereby increases in value are of course more accepted than losses in value. It is also assumed that there is no positive correlation between the security of the loan and the economic situation of the borrower, but this does not really occur in the day-to-day life of a bank. If the credit security is still insolvency-proof, it is purely a matter of security that the banks accept.

Common collateral for lending transactions

Common collateral for lending transactions

In practice, the theoretical possibilities are basically reduced to a fairly manageable number of possible collateralizations. The group of assignments or assignment of claims represents a majority, because this includes:

  • comprehensive insurance (vehicle financing)
  • Fire insurance (real estate financing)
  • Life insurance (death risk)
  • Capital-forming life insurance (loan repayment)

Guarantees are also very common in everyday banking, whereby the concept of surety, which acts as a deterrent to many, is often avoided and instead a second borrower is required in the loan agreement, although this is actually simply a guarantor. A distinction is made between guarantees from relatives, the spouse guarantee, guarantees, letters of comfort and guarantees from partners.

In practice, of course, securing loans using land charges is also common, but mortgages can only be found in ship financing in the form of ship mortgages, but not otherwise, since mortgages are ancillary collateral (that is, they are “already used” ).

Loans to cancel card debt | What is the best option?

Loans to cancel card debt are an option when you are drowned by expenses. Day-to-day shopping, your children’s school, unforeseen; and many other circumstances can get you into debt. Debt reunification is one of the ways to deal with them, but how to cancel a derivative from the use of a credit card?

How to deal with debts on a card?

How to deal with debts on a card?

When facing the payment of your credit card debts you can apply for various loans. However, some banking institutions do not accept the reunification of debts to deal with these situations. This is because a loan under these circumstances has no collateral. But other associated debts.

Thus, many banks do not accept the risk that this type of product entails. Those who do accept them usually put higher interest than normal to compensate. In addition, they will ask you for an asset, such as your house or car, in order to finance the new loan.

Loans to cancel card debt

Loans to cancel card debt

Although it may be difficult, the possibility of getting loans to cancel these debts exists. For starters, if there are many, you can opt for reunification, which gives you the advantage of having only one creditor. However, the repayment term will increase as a result of the unification of all debts into one.

Another option is to refinance debts one by one to get better conditions. This is easier to do if you only have one creditor. But you can choose to negotiate higher expenses and try to find a balance that benefits you. Negotiating a reduction in fees, extending the repayment period or a lack for a while maybe the solutions you are looking for.

On the other hand, there is that of resorting to a single loan to cover all debts. Thus, all debts could be eliminated at once, but a new debt would be incurred. In this case, you would have to calculate the amount that is already owed, in addition to looking for the option that best suits what you can pay.

However, you have to look at other details, as is the case with interest, since you could pay more. Also, if you are in a complicated situation, do not hesitate to seek professional advice to find the best solution.

In short, loans to cancel card debt are an option to consider. It is important to analyze all the options and look at the financial risks that you may have. In Good Credit Loans you can compare different finances that adapt to the total amount of all your debts. Remember to always evaluate interest rates, since they may be in your favor or on the contrary against you.