What is a Collateral Loan?

A collateral loan is also known as a secured loan because it has some form of guarantee. You put down something of value or assets to secure the loan. If you default the lender can then seize your assets and sell them to get the money owed back. This protects the lender from losing money. Some common forms of collateral are real estate equipment inventory and even things like art and jewelry can be pledged. Because you are offering security on the loan collateral loans tend to have lower interest rates. If you have a low credit score OR havent been in business for very long a collateral loan might be your only option in terms of loans. Heres an example. Have you ever bought a car or a house? A mortgage is a form of a collateral loan with the property itself being the collateral. So if you fail to pay the lender can then foreclose on the home. Auto loans work in much the same way. So how do collateral loans work? Before you are approved for a collateral loan a lender must determine the value of the collateral you are putting up. For example when real estate is involved they will get an appraisal of the property and figure out its fair market value. In coming up with the loan amount the lender will offer a percentage of the collaterals total value. This value is reflected in the loan-to-value ratio or LTV associated with the loan. The higher the LTV generally the more interest you will pay. Additionally depending on loan terms you may need a bigger down payment as well. So Where can you apply for one? You can apply through a traditional bank. Bank loans however can take a bit of time as the application process is not as fast as youd get with an online lender for example. Online lenders are another great resource for collateral loans. And with many such lenders they can get you the funds rather quickly in certain circumstances it could be a matter of a couple of days. First Union Lending offers numerous financing programs designed with small businesses in mind. Our business loans are fast and flexible with financing options ranging from 5000 to 2 million dollars. We have the funds to help! Call today to learn more about our various financing solutions to help your business grow and become successful. ,

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