Collateral Loan Meaning
Collateral Loan Meaning
Collateral Loan Meaning
There are many different types of collateralized loans. Your mortgage, for example, is a type of collateralized loan; If you stop making monthly payments-- and can't do a mortgage modification with your lender-- you could lose your home. The loan that comes with unsecured loans, on the other hand, is usually only backed by your willingness to repay, and a lender's confidence in your income and credit history.
How do collateralized loans work? Read on to learn how lenders determine the value of your collateral and use it to measure the size of your loan.
Collateral Loan Meaning
A collateralized loan is often called a secured loan. This means the loan is guaranteed by something you own. And if you can't pay your loan, the lender has the right to claim them on the collateral,
A collateralized loan may offer a lower interest rate or a larger loan amount than an unsecured loan such as a credit card. In some cases, it may be the only loan option for a borrower who either has a short or unstable credit history, or whose income is too low to qualify for an unsecured loan.
Sometimes getting a loan becomes very easy when you want to have some kind of collateral-- like your house, car or your wife's jewellery. Loans with collateral help to secure the money you borrow, potentially at lower interest rates. However, if you fail to repay your loan, a collateralized loan could mean you lose this valuable asset.
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