Secured Loans

Getting Knowledge on a Loan Company's Rights Regarding Security

When you take out a secured loan, you give your loan company specific rights regarding the use of the property you've put up as collateral. You may use your house, a car, a boat, stocks and shares or other assets as collateral, or security for the loan. In order to ensure that the loan is repaid, your lender will establish terms for taking possession of the collateral if you default on the loan. These terms are set out in your lending agreement, the contract you sign with a loan company.

Before you sign a lending agreement, make sure you are aware of the loan company's rights. You may review the contract before you sign, ask your lender to clarify any points that aren't clear to you or consult a solicitor about the terms of the agreement. The more you know about your requirements and risks with secured loans or pay day loan deals, the more likely you are to avoid adverse financial consequences.

Rights Regarding Collateral

A secured loan can give you the financing you need to purchase new furniture or appliances, consolidate high interest debts, have an elective medical procedure, pay for a wedding or a special holiday or meet other important personal aims. Because a secured loan is guaranteed with valuable personal property, you may borrow a larger sum and achieve lower interest rates than you might obtain with an unsecured arrangement. However, if you are unable to repay a secured loan, the lender has the right to seize the property in order to pay off the debt.

When you put up collateral for a loan, you must use property that has sufficient value to repay the loan if you default. Many borrowers use their home equity as collateral, but some lenders will accept an automobile, motorcycle, recreational vehicle or an investment fund as collateral. Some lenders will not accept movable property as collateral, or will charge higher interest rates for assets that can be quickly relocated.

According to the terms of a secured loan agreement, the lender has the right to take over the collateral if you do not repay your loan as agreed. Most contracts state that the loan company may sell your house or car in order to recoup the money that it lent to you. The contract should set out the terms of repayment very clearly, so that you are aware of the consequences of late or missed repayments. You should know how much time will be allowed to pass before your property is seized, and whether you have any rights to dispute this action.

Falling Behind in Repayments

In an unpredictable world, it's not uncommon for borrowers to have difficulty repaying their debts. Missing repayments on an unsecured loans can be risky, however, because you may face the loss of your property if you fall into arrears. Losing a home, in particular, can be devastating to a family and can undermine your loved ones' security. Before you sign an agreement, you must know where a lender will be flexible if you miss one or two repayments, and what will happen if you lose a job, suffer a serious injury or get divorced and can't keep up your end of the loan agreement.

Getting knowledge on a loan company's rights regarding security is a must if you are to take out a secured loan. A lending agreement is a binding legal contract, and failing to follow the terms can have severe consequences. Review the agreement with an attorney to make sure you understand its terms and conditions before you make a decision that could affect your financial future.