Loan – how to protect yourself?
October 10, 2019
Everyone who has a loan probably knows how important it is to secure it. It is important both from the point of view of the borrower and the institution granting this loan. Do you know ways to secure a loan?
Poles often borrow. The purposes of the loan are many, which you could already read in the article: “What are we borrowing for ?” . Each loan must be repaid. It is the borrower’s responsibility to pay monthly installments regularly and until the end of the contract. To make this period run smoothly, you should secure a loan in one of the following ways:
This is probably one of the best forms of loan collateral. It consists in the fact that a third party guarantees the repayment of another person’s loan. The surety is created in the form of a written contract which contains information about the surety person and is the legal basis for a possible repayment order. By signing the surety, the guarantor agrees that in the event that the borrower fails to repay the debt, he is responsible for its repayment. In other words, the guarantor must repay the loan if the borrower does not.
For a lending institution, a surety is a very convenient and reliable security. If one person does not pay, there is always another designated person. For a borrower, this is also a good way to secure it, because in case of any repayment problems there is a person who can help. However, it should be remembered that not everyone can become a guarantor. Such a person must be well checked in advance in terms of his financial situation and real possibilities of paying back the loan for the borrower.
Another solid security this time connected not with the person but with the real estate. If the borrower has his own real estate, house or flat, he can include it in the loan security as a mortgage. For the bank, the matter is simple – if the borrower does not pay back the loan, the bank can recover money from the property, usually selling it. For the borrower, it is also a lot easier, because he does not have to look for a person to guarantee him. In addition, in the case of a mortgage, you can get a much higher loan amount and on more convenient terms.
It looks like a mortgage, but this time it is movable, i.e. all high-value household appliances, cars, bicycles, etc. If the borrower fails to pay back the loan, the money is recovered from the sale of the pledged item.
The item must therefore have a value at least equal to the loan plus interest. In some cases, it may be that the borrower has the right to use the pledged asset as long as he regularly repays the liability. It will be taken away from him only when payments from the loan will not appear.
Bill of exchange
An equally popular way but little protection for the lender. A promissory note is the promise of its exhibitor to unconditionally pay its debts. Its strength increases when the bill is also signed by other people. Then they also become responsible for paying off the loan. The promissory note alone is not desirable, but its surety.
As you can see, the loan collateral is helpful to both parties: the borrower and the lender. It is worth thinking about in what form it will be the most convenient for us and at the same time solid enough for a financial institution to want to grant us a loan.
With a choice of surety, mortgage, pledge or promissory note, we really rely on different security methods and certainly each of us will be able to use at least one of them. We can look for a trusted person who will give us a hand, pledge your apartment or car – no matter what we choose, our chances of getting a loan increase. This is very important, which is why we are planning a solid security for our loan today.