Security loan is the type of loan borrowers have to assign collateral to the lender to certain tangible assets such as stocks, bonds, life insurance policies, a car, or a home, in case of borrower defaulting on the loans, in order to reduce the lender's risk.
1. Fully and partially secured loans
a) Fully secured loan
If the borrower signs over to the lender assets equal in value to the total loan, that loan is fully secured.
b) Partial secured loans
Partial secured loan is the loan that is not fully secured. Only a certain percentage of the loan is being secured by certain tangible assets.
2. Signature Loans
A borrower considered to present little risk to the lender may be asked for nothing more than a signature on the promissory note and loan application form.
3. Co-Signer
Other person may be required by the lender to sign the loan agreement. By signing, the co-signer agrees to repay any outstanding balance on the loan, if the borrower fails to do so.
4. Durable Goods
a) When consumer durables (such as vehicles, appliances, and furniture) are bought with credit loans, these articles are offered as security for the loan.
b) If the consumer obtains a loan from a bank, credit union, or trust company a chattel mortgage will be signed that transfers the ownership of the goods to the lender in case of borrower default.
5. Lien
A lien is a claim registered against certain property. If full monthly payments of condo fee is not paid to the management company, the management company may register a lien against the condo.
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Saturday, November 22, 2008
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