A new trend in the lending market is collateral loan, the method is already quite popular in the United States and Europe.
What generates this great interest in people is that it is possible to get the approval of high values, with a long term for payment and with much lower interest rates.
To give you an idea, the annual interest rate on this loan is about 17.04%. A much lower amount than overdraft (301.4%), credit card (278.7% revolving or 164.5% in installments) and personal loans (118.5%).
Thus, the ideal loan modality for those who want to make some kind of personal investment or in their company and to negotiate expensive debt with higher interest.
How does it work?
Secured home loan is the modality in which the client pledges the property to insure that he will repay the installments.
Thus, it is possible for the financial institution to grant higher amounts and with lower interest rates, since, in case of default customer, the institution is protected by the property given as collateral.
Every operation is registered in a notary’s office and, at the end of the payment, there is a discharge registration.
However, the property remains in the name of the owner for the entire period of the loan and repayment of installments, and may continue to enjoy the property normally, including renting.
The rules are similar to when you buy a financed car and it will be guaranteed until the final payment of the value.
What are the main advantages of this loan?
The main advantages of opting for this loan modality are:
– No need to sell the property, it is possible to have the necessary money in hand and still enjoy it, living or renting;
– Payment terms: Usually, payment terms range from 60 to 180 months;
– High value: Most financial institutions lend up to 60% of the property value;
– Low Interest: The best interest rate option in the market.
What is the procedure?
The first requirement is that the client has a property registered in his name, which can be either commercial or residential.
If this requirement is met, the customer must go to the financial institution’s website, or contact by telephone or email and request a simulation of the desired amount.
Subsequently, a credit analysis is carried out by the financial institution to verify that the client is able to afford the loan.
After approval of the registration, a legal analysis is made of all documentation delivered and an evaluation of the property is performed.
If everything is approved, the client is called to sign the contract, makes the so-called bank credit note and is registered with the real estate office.
In the end, the money is released to the customer’s account.
Is it possible to lose the property?
Once the property is given as a guarantee of debt it is possible to lose the property.
However, this will only happen if the client fails to repay the loan installments. It is therefore important to assess whether you will be able to afford the financing installments.
And yet, the financial institution tries to negotiate before starting the real estate taking process, since it is a costly process for it and there is no profit for the financial institution.
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