Thursday, January 24, 2013

Collateral Loans: An Overview

Collateral loans have become prevalent nowadays because of the significant number of individuals who need fast cash. A collateral pertains to an assurance or a guarantee that borrowers use to ensure lenders that they will repay their loans. It somewhat safeguards the welfare of lenders and enable them to make the most of their investment.

In general, anything of high value can be used as collateral. Houses, cars, and jewelleries, are commonly used collaterals out there but the most used of them are cars.

Using a Car as Collateral

Using a car as collateral is deemed risky by many financial experts, but it enable borrowers to obtain the amount of funding that they yearn for.
By choosing the car title option, they agree to the stipulation that they may lose their car in the process. Borrowers surrender their car title in addition to other legal documents and in turn, the lender keeps the title until the loan is fully paid.
While it is quite reckless, many choose such option because it is way better than selling the car. Another good thing about car title loans is borrowers can use their car even though their loan is not yet paid fully.
Because of the mentioned stipulation, the vehicle that will be used as collateral should be insured. Otherwise, the loan application will be declined.

The Process

Interested individuals should visit the office or website of lending companies that offer collateral loans and check out their requirements. In general, the requirements for collateral loans include the car title, proof of residency, social security number, and driver’s license, among others.
As soon as they are submitted, borrowers need to fill up a couple of application papers. Afterwards, they need to place their signature to signify that they agree to the guidelines and stipulations of the loan. Finally, as soon as they pay off their debt, their car title will be returned to them.


Nowadays, getting loans (especially collateral loans) has become a part of life and because of this; many lending companies make it a point to simplify the application process so as to lure potential clients. However, it should be remembered that having a foolproof repayment scheme before hand and borrowing more than they can afford are very critical.

As mentioned in this article, collateral loans are very beneficial but they also come with risks that could sink the finances of borrowers. Furthermore, loans can take away their peace of mind that is why the abovementioned precautionary measures should be taken seriously.

The above article has posted by Amy Lewis, owner of the finance corner. For more details about Amy you can visit her social media profiles in below mentioned urls:

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