Securing debt repayment is a protection for the creditor against our insolvency. There are distinguished loan security: personal and material. The type of collateral we choose depends on the type of loan and its amount. With a private loan, a promissory note will work, while with a secured loan – forfeit as security.
Loan security – what is the purpose of it?
Securing the loan is the protection of money borrowed from a bank or a loan company. Cash collateral may be voluntary or mandatory. It all depends on our financial situation when applying for a loan in installments. The loan security may be indicated by the lender also when our income is low.
This form of financial security is used so that in the event of our insolvency due to inability to work or losing it, we will not be able to pay debt to our relatives or institutions in which we borrow money. If it turns out that we are not able to repay the loan taken, the creditor will use for this purpose the loan pledged as part of the loan, eg movable property or real estate.
Types of loan collateral
Securing the loan is a guarantee of cash back to the creditor. Thanks to the fact that several types of loan collateral are distinguished, the lender is able to match appropriate credit risk assessments to each financial liability. Security loans are divided into:
- personal – those in which the lender is responsible for the debt with all his assets;
- factual – the debtor is only liable for individual elements of his property.
Personal loan collateral is:
- assignment of receivables;
- Bank guarantee;
- joining the debt;
- taking over debt;
- power of attorney;
- civil warranty;
- bill of exchange guarantee;
- bill of exchange.
Tangible collateral for loans are:
- general pledge;
- registered pledge;
- bank deposit;
- transfer of title to security;
- blocking funds on the account;
- credit insurance.
What is a bill of exchange?
Not everyone uses loans from loan institutions because there are also private loans that are equally easily available. Using them is also worth securing the borrowed cash. To do this, select a promissory note, i.e. a security which obliges the person indicated in the document to pay within a specified period of the selected amount.
The following types of promissory notes are distinguished:
- own – the promissory note maker promises that he will pay the whole of the recipient himself;
- Routed – the exhibitor undertakes unconditionally that another person (trasat) will pay the recipient (remittent) to pay a specified sum of money;
- blank promissory note – it occurs when at least one of the listed elements is not included in the promissory note agreement. The document is only valid if all its elements are completed.
What is a declaration of establishing a mortgage?
When deciding on a mortgage in a bank, we should be aware that the lender may require us to secure the transaction. For this purpose, a mortgage may be established. Our task will be to sign a statement on the establishment of a mortgage in order to ensure that if we do not repay the loan and find, for example, the ERT register, the lender can take over our premises. The first sign that should worry us is to receive a prompt, or call for payment. So let’s make sure payment dates.
What is important, the creditor can also secure the mortgage, the right to perpetual usufruct, the cooperative right to the premises and the right to a single-family house in a housing cooperative.
Transfer of title to security – transfer of ownership of the property provided?
Transferring a security is one of the material methods of cash security. This is the transfer of ownership of the property provided that a debt is created on our account. The collateral may be movable or immovable. When we do not pay the payment, the creditor becomes the sole creditor of the secured item, e.g. the vehicle. At the time the security is established, the lender is only a co-owner of the transferred property.
The transfer of title to collateral often concerns a loan with a vehicle pledge or a car loan. Each time we secure the loan, we should be informed by our lender.
Is loan insurance obligatory?
A large number of lenders operating online give loans without collateral. This does not mean, however, that the borrower can not count on securing the transaction against its possible insolvency. For this purpose, you can use credit or loan insurance. We can reach for them during the loan period, but also when applying for additional money.
Loan insurance is a good solution to maintain financial liquidity. If we feel that our current financial situation may change soon, and we do not want to impose debt on our relatives, we can take advantage of it. However, it should be remembered that it is expensive and its price depends on the amount of the loan or loan.