Maricor Bunal
Otherwise known as secured loan, a collateral loan is a type of personal credit that requires borrowers to put up a valuable asset. Banks approve loans of this type faster than an unsecured loan because they have more security.
Benefits and Disadvantages
As consumers, the main benefit of getting a secured loan is the fast processing time. Banks consider this type as a less risky type of investment. In case of delayed or delinquent payments, they can just repossess the property to compensate for their lost loaned money.
However, one main concern consumers need to be aware about collateral loan is that this poses high risk on your assets. Many don’t consider this as a good solution to immediate, non-profitable financial needs such as hospitalization cost, utility bills and school fees.
Types of Assets That Can Qualify as Collateral
Savings – Use your Savings or Current Deposit Account if you have any and qualify for a loan in just hours. You’ll also enjoy lower percentage rate per annum compared with a non-collateral loan, which is also takes longer to process.
House – Home equity may also be used as a guarantee for a home improvement or makeover loan. To calculate your home’s equity, know the difference between the mortgage you still owe and the property’s market value.
Car – A car is considered a valuable property. By refinancing your current car loan can also help you avail a secured loan with a much lower rate.
What are Secured Loans Best For?
You’re putting one of your assets on the line, so better make sure you’ll be getting something more from the loan. Experts highly suggest consumers to get a collateral loan preferably for two main reasons:
Fund your own business – Establishing your own business is one of the proven-and-tested ways to build wealth, just as long as you’ve planned it very thoroughly. Now if you don’t have enough cash for capital, a collateral loan is the best way to go.
Purchase of a more valuable asset – Acquiring more assets is another effective wealth-building strategy. So if you’ve found a more profitable real asset (e.g., rental property, piece of land in a suburban area) or a low-key, low-maintenance car, don’t hesitate to get a secured loan.
Secured Loan Requirements
You can qualify for a secured loan if you’re at least 21 years old but not over 70 by the time the loan matures. You must be either a regularly salaried earning at least PHP10K per month or a self-employed individual with a profitable business operating for 3 years.
Upon application, bring along you’re the following documents:
- Mayor’s permit for business owners
- Valid IDs
- Credit History
- Payslips
- Proof of Ownership of the Asset you’re putting up (e.g.., Deed of Sale, Registration Number)
- Proof of Residence
Exploring More Collateral Loan Options with Loansolutions.ph
The good thing these days is the availability of more secured loan options with banks and private lenders becoming more competitive in their offers. To take advantage of this, get a loan via our 3-Step Online Application Form and get matched up the one of our partner providers around the country.
