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Loan Collateral: Here’s a Detailed Insight into Collateral Meaning and Financing

Here is all you need to know about collateral, its types, pros and cons, how taking a loan against it works, and more. <br>

HeroFinCorp
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Loan Collateral: Here’s a Detailed Insight into Collateral Meaning and Financing

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  1. Loan Collateral: Here’s a Detailed Insight into Collateral Meaning and Financing

  2. What is Collateral? • Asset you pledge to get a loan • If you default, the lender can seize and sell it • Collateral loans can meet both professional and personal needs • It also motivates you to repay the loan on time

  3. Collateral Importance and Scope • Lenders need collateral to cover the risk of lending • A floating or fixed asset can act as collateral • Collateral type depends on loan type • You should provide relevant collateral documents to prove ownership

  4. Collateral Types • Commercial or residential property • Machinery and plant • Vehicle like car or two-wheeler • Gold • Bonds, shares or other financial securities • Invoices yet to be paid

  5. Collateral Loan Examples • Mortgage (home loans or loans against property) – Collateral can be fixed asset • Pledge (goal loan) – Loan provided based on asset ownership (forfeited in case of default) • Hypothecation (car and bike loans) – Asset ownership remains with borrower, but forfeited in case of default • Invoice collateral (invoice discounting) – Collateral refers to unpaid invoices of a business

  6. Interest Rate on Collateral Loan • Based on type of collateral arrangement

  7. Workings of Collateral Financing • A borrower with asset applies for loan • He provides relevant documents to prove ownership • Lender sanctions a certain percentage of the asset value as loan amount • In case of default, lender forfeits and auctions asset to recover loan amount • In case of complete repayment, lender gives back condition-free asset ownership to the borrower

  8. Pros of Collateral Loans • Easy to get • Interest rate lower than unsecured loans • High loan amount usually • Long-term loan and easy to repay

  9. Cons of Collateral Loans • Lengthy application • Time-consuming processing • Your asset is at risk

  10. Conclusion Assess your needs, pros and cons of collateral loans, and your repayment capacity, before taking a collateral loan.

  11. Thank You !Would Love to Hear From You Hero FinCorp Limited 09, Basant Lok, Vasant Vihar, New Delhi - 110057 Tel. 18001024145 Email Id: Corporate.Care@HeroFinCorp.com Website: https://www.herofincorp.com/ Know more- Loan Collateral: Here’s a Detailed Insight into Collateral Meaning and Financing

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