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

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• Loan Collateral Heres a Detailed Insight into
  Collateral Meaning and Financing

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• 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

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• 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

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• 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

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• 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

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

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• 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

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

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

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

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• Hero FinCorp Limited
• 09, Basant Lok, Vasant Vihar, New Delhi - 110057
• Tel. [phone]
• Email Id Corporate.Care_at_HeroFinCorp.com
• Website https//www.herofincorp.com/
• Know more- Loan Collateral Heres a Detailed
  Insight into Collateral Meaning and Financing