Lack of savings or unexpected financial problems make us look for quick access to cash. When we are unable to take out a loan, one of the options is secured loan, …
Lack of savings or unexpected financial problems make us look for quick access to cash. When we are unable to take out a loan, one of the options is secured loan, which is an easy way to obtain the necessary funds. What is the solution and is it profitable?
What is the secured loan?
A pledged loan is a solution thanks to which we receive the necessary cash, and the vehicle, real estate or other valuable assets become the security for paying off the liability. Failure to pay on time results in the loss of the pledged good to the lender.
Most places where loans are granted are verified by BIK, KRD or BIG registers, assessing doubtful creditworthiness and creditworthiness extremely mildly – thanks to that even indebted persons without impressive credit history obtain a loan against them. It is also a perfect solution for people who do not have documented sources of earning, and the subject of the pledge is sufficient security for repayment.
Types of loans secured by
The main types of loans covered by a loan include a car loan and a real estate loan. At various outlets and loan companies, you can also pledge other valuable items such as jewelry, home appliances, electronics and watches.
A car loan is the most popular option for such a commitment. The owner of a vehicle that is not the subject of a lease or loan may apply for a loan of this type.
As a rule, cars taken as collateral cannot exceed 10-12 years, require current technical tests and an additional insurance policy (AC). The car can be borrowed up to its value, but most often it is up to 80-85% of the vehicle’s value.
To complete the formalities, documents such as an ID card, second identity card, e.g. driving license, car registration card, policy and vehicle card are necessary. A vehicle taken as collateral can still be used by the borrower.
When borrowing a car, it is necessary to enter the loan company as a co-owner into the registration certificate, which in turn requires a visit to the appropriate communications department. If the loan is not repaid – the lender can sell the vehicle.
A loan against real estate is similar to the above, except that the subject of collateral is real estate. Amounts loans of this type are already much higher – they can range from tens of thousands to even several million depending on the market value of the property.
In real terms, the amount of such a loan is usually 60-80% of the value of the property, and it can be used by private individuals as well as companies and farmers. The subject of security may be a house or construction, an apartment, a construction plot, a hotel, a tenement house, arable land or land, business premises or office buildings.
Various documents are required to complete the formalities – it all depends on the requirements of the lender.
Most often, however, it is the number of the land and mortgage register, photos of rooms, the building, the plot, etc., a certificate of the right to ownership, a certificate of rent debt or lack thereof, as well as the number of people registered in the premises. The act of purchase and the tax certificate from the tax office paid or not are also useful.
Advantages and disadvantages of secured loans
A secured loan is an option that allows you to get cash in an emergency if you don’t have creditworthiness, etc., and you have a vehicle, property or other expensive item that you can use as collateral. It’s a simple formula that is available to everyone.
Unfortunately, it is not without flaws, because it is subject to a considerable interest rate, and in addition, in the absence of repayment – we lose property or other valuable value to the lender. It is also worth remembering that the loan amount is never equal to the market value of the pledge.
When does the secured loan pay off?
A secured loan is not a cost-effective solution, as it may result in the loss of valuable assets as well as an increase in the amount of debt. This is a way out that requires careful thought. Therefore, before making a decision and submitting your application, you should consider other solutions, e.g. consumer bankruptcy.