Collateral Security

by Ray K. Financial Consultant
We can provide you collateral security in the shape of BGs / SBLC for getting your projects funded from banks.
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Review on Collateral Security

A collateral loan is also known as secured loan. It is a business loan obtained from a banking or other financial institution, where in exchange, the creditor may sell that which is offered for collateral if the loan is unpaid. This collateral can be in shape of a Bank Guarantee or SBLC. A collateral loan is often offered at a lower interest rate than an unsecured loan, because there is a guarantee of repayment should the borrower default on the loan.

Depending on the lenders requirements, a collateral loan may use different things to secure the loan. For example, BGs, SBLCs, stocks or bonds are used to establish a collateral loan. Ownership in property may be accepted as collateral. The decision to accept or decline collateral belongs to the lender.

When the borrower defaults, the lender sells the collateral to get back the loan. The lender has rights to claim money from the banks which might have issued the collateral security, if it is in the shape of BG or SBLC. In these cases, a lender would thus claim his money lent to the borrower.

If the lender is actually holding the physical item or money, these will be returned as soon as the secured loan is repaid in full. For example, with a secured credit card, the lender holds some of the borrower's money in a special account as collateral. If the borrower closes the credit card account or convert it to an unsecured card, the lender writes the borrower a check for the amount of the collateral deposit.

With large secured loans, such as commercial loans, the lender has a lien on the collateral giving the lender the legal right to seize the collateral as payment for the loan if the borrower defaults. After the borrower repays the loan in full, the lender sends the borrower a document stating that it has released the lien on the borrower's security - may it be in any shape - BG, SBLC, Property, etc.

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About Ray K. Innovator   Financial Consultant

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Joined APSense since, December 9th, 2011, From Harrow, United Kingdom.

Created on May 26th 2012 06:58. Viewed 1,559 times.


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