It is not uncommon to see, especially on the internet, financial institutions that offer personal loan as collateral for a property. The temptation is great because with such a loan you can borrow high values - given the value of a property.
But do you know how the secured loan works? Here we clarify for you!
How does secured loan work?
Usually the company makes available an amount of money for the loan, according to what the client asks for and according to the value of the property that will be used for collateral.
The property that the client will offer as collateral for the loan is available to the financial institution. If the client does not comply with the loan installments, the property enters as collateral, and may even be taken by the institution. Knowing how secured homeowner loan works and the care you must have is very important.
Advantages of the procedure
- Long term – from 60 to 180 months
- Achieve high values - up to 60% of the property
- Low interest: from 1.15% per month
- You can use the property: you can live or rent, you do not need to sell
The risks of giving the property as collateral
Now that you know how real estate loan works, know that many finance experts do not recommend making loans using the property as collateral. This is because you may not be able to pay the installments of the transaction and thus may have your asset well compromised.
Another problem with home equity loan is that the value of credit granted by the financial institution can be many times higher than the debtor’s ability to pay. Some people who went through this had their property taken or even had to sell them to repay the loan.
So attention. It is recommended that if you look for other ways to make a loan that does not require a guarantee as important as a property.
In addition to these care that are extremely important, we separate some recurring questions to help you have no error in performing this procedure.
I’m going to make a loan with property guarantee, how should I proceed?
If you still decide to take out a personal loan that requires a property as collateral, the main thing is to separate the installment amount and not to let the payment delay for more than 30 days. If you delay installments you run the risk of having your property sold by the institution.
Do you know what it means to have an alienated property? Well the alienation of a good is the transfer of it to third parties. That is, your property, in case you can not afford the loan, will be under the control of the institution where you took the loan.
Look for the best bank for secured loan: Where to do?
- See our list of the best banks. Enter the link and you will have the complete article about the best banks, their values, rates, how to do .. Read: Where to do loan with property guarantee? What is the best bank?
Some recommendations to follow
One caution when making a loan that requires your property as collateral is to pay attention to undue fees. Because the value of these transactions is often high, abusive rates on the loan may be included.
Other malicious institutions still require an advance payment saying that such a fee refers to an insurance defaulter or a third-party guarantor. Make no advance deposit – even because this procedure is illegal.