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Personal Loan Collateral

Collateral is a very simple lending concept that everybody who takes out a loan needs to know about. A piece of collateral is an object of value put up to secure a loan. If the borrower can’t repay the loan, the lender takes possession of the property to cover their losses.

Using personal loan collateral can help people with bad credit and low incomes get loans. There are many lenders that will make personal loans if collateral is used.

Personal loan collateral can help a person get a loan with lower interest. Using personal loan collateral gives a borrower the option of not paying off the loan. If the borrower can’t repay the loan they can walk away from it with no obligation to hand over cash.

How to Find Personal Loan Collateral

The most common source of collateral loans most people are familiar with is the pawn shop. Pawn brokers make personal loans on a wide variety of collateral including jewelry, firearms, electronics, automobiles and coins.

Many people should be able to find personal loan collateral right in their own homes. Simply look for items that have value that you don’t use everyday such as guns, jewelry or camera. These items can serve as personal loan collateral.

Vehicles can also serve as personal loan collateral many lenders will pawn vehicles. To use a vehicle as personal loan collateral you will have to have clear title to the vehicle.

Other Uses of Personal Loan Collateral   

The pawn shop is not the only source of personal loans with collateral. Using personal loan collateral can take the conflict and drama out of lending money to friends or family.

Instead of just giving a friend or relative a cash loan, ask for them to put up a piece of collateral. The collateral can secure the loan and help the person lending the money recoup their losses. Putting up collateral can prove trust and ensure repayment.

Using collateral can also help you borrow money from individuals you may not know very well such as acquaintances or coworkers. This way repayment can be secured and more money can be borrowed.

Always have some sort of written agreement that outlines the interest and terms of the loan when you make these loans. A written contract can help borrowers and lenders avoid conflict and arguments.

Other Kinds of Personal Loan Collateral

There are other kinds of collateral that can be used for personal loans including real estate equity and ownership in businesses. Many online lenders will make personal loans if equity in real estate or stakes in businesses will be put up as collateral.

One thing to remember is that the amount lent will be a percentage of the value of the personal loan collateral. The lender has to put these limits on the amount lent in order to be able to make a profit if they have to sell the personal loan collateral.