5 different types of secured loans you need to know about

 

If you have taken out loans against your car or your house, you are already aware of the concept of collateral. For the uninitiated, collateral refers to the security of a loan. If you are keeping your car as collateral to a loan, your lender can take your car if you fail to make payments.

Collateral is almost a must when you are applying for a large sum. In fact, pledging a collateral makes it a lot easier to get quick loans from reputable sources. You will also be paying lower interest rates in case of secured loans since your lender has an assurance that they will not lose their money.

There are quite a few types of collateral loans that we have seen in the US over the last couple of decades. The next 5 loans we are about to talk about are the most common secured loans that people opt for during money crunches –

1. Mortgage loans –

This is one of the most common loans in the current economic scenario of the country. A mortgage loan’s collateral is real estate, and the purpose includes renovation of property or home improvements. The lenders first evaluate any home used as a primary or secondary residence and then, you can get up to 97% of the value as a loan. If you are not the owner, or if you mortgage a rented place, you can get up to 75% of the real estate value. Your loan is secured by placing a lien on your property. The rates will depend on market price, payment terms, and your credit score.

2. Equipment loan –

This is a type of loan most common among business owners and entrepreneurs. These loans are usually used for the purchase of new equipment or the refinance of the equipment. These loans are secured by various types of equipment that are properties of the business. This can include lawn mowers as well as Apple Macs. You can easily borrow up to 70% of the net value of the equipment pledged to these loan companies. The amount usually decreases as the age of your factory/company equipment increases. Most commonly, terms are 3 to 7 years, and the interest rates depend upon the market.

3. Vehicle loans –

If you need a loan to buy a new car or refinance it, your car automatically becomes the first choice of collateral. This is also a collateral loan that uses your vehicle as the equity. You can use your vehicle and pay off the installments at the same time during the loan term. Be sure that your lender will check your credit history before sanctioning the loan amount. So keep it in shape from now on, if you want to apply for a vehicle loan in the future.

 

 

If you have misplaced your title, it becomes really difficult to get a loan approval. But, at https://bayareatitleloans.com/ you can still apply for a loan if you are the registered owner of your vehicle. Bay Area Title Loans makes sure that you can get a vehicle loan even if your vehicle is not fully paid off. You can borrow a minimum of $2,600, and you can get the cash on the very day of the approval. The maximum amount of the loan will depend on your car brand, model, and condition. You can expect between 70%to 80% on a new vehicle from your loan company. These title loans usually have a payment term of 3 to 5 years.

4. Business assets –

This is a little less common as compared to the three types of loans mentioned above. Business assets loans are a form of a collateral title loan. You can use all your business receivables as the security to get a loan from the bank or a credit union. In case you fail to make the payments, your creditor can collect the receivables directly from your business clients.

This is quite risky for small businesses as any failure to make payments will directly harm their reputation and relationships with clients.

It is common for banks to lend only 70% of the business accounts receivable that are aged 90 days or less. This is because it is assumed that if you have receivables that are aged more than 90 days, you will have difficulty extracting payments. This makes the pending accounts less lucrative as collaterals. The terms of payment can vary between a couple of months to a year at the maximum. The interest rates can vary depending on your credit score and your accounts receivable.

5. Pawnbroker loans –

This is one of the dodgiest loan forms that exist even today. Pawnbrokers usually give short-term loans against properties owned by the lender. These properties can be anything including electronics, jewelry, tools as well as houses. This usually depends on the amount and the urgency of the lender. It is not uncommon for firearms to be used as collateral in the state of Texas. The law on pawnbroker loan is very sketchy, and you can be easily duped when it comes to the interest rates, payment terms and value of your property.

The amount of loan depends on the condition of the collateral and market value. In the case of missed payments, the pawnbroker can take complete ownership of the collateral. As seen in Old West movies, most of these seized collaterals end up in the pawnshop as sellable later on. Pawnbroker loans are highly frowned upon by finance experts and other finance companies. They are still popular among people in need of emergency cash since pawnbrokers do not have any interest in credit score or payment history as long as you can place a security.

Loans are not the easiest to understand. Sometimes it takes a lot of bad experiences, and sometimes, it takes the smart advice from a reliable source to understand the hidden secrets of successful refinancing. If you have any queries about collateral loans and the terms involved, check out https://bayareatitleloans.com/ or give us a call on the given number. We are here to help you solve your financial problems.