Very often, to make a financial commitment, you need adequate security for your debt. It provides the lender with security if the borrower has problems paying off the debt. Few people know that there are two ways to secure a debt – personal and material.
Personal loan collateral
In the case of a personal loan collateral, the debtor is liable with all his property for the debt. Examples of personal collateral for a loan are assignment of receivables, power of attorney, civil guarantee, promissory note or simply a promissory note. Very often, the personal security of a loan is that the borrower must find a person who will vouch for him. Thanks to this, the lender will contact the guarantor in case of problems with recovering the money.
Material collateral for the loan
In this case, the debtor is only liable for a certain part of his debt assets. An example of such collateral is a mortgage where the collateral for the loan is a mortgage for which the loan was taken. Another example is a general or registered pledge, bank deposit, or credit insurance.
Is debt security needed?
It’s worth noting that you don’t always need to provide a loan for collateral. Today, the lenders offer is very extensive and you can find loans on various terms, including offers without BIK.
You should also think about building a positive credit history that will increase your credit standing. This in turn means that in many cases you will not need debt protection.
On the other hand, the loan collateral itself is a great solution for all people who do not have the best creditworthiness and need a loan.