If you have bad credit but need a cash loan quickly, you may find that the only way to get the money you need is by getting a cash collateral loan, also called a secured loan. This type of loan requires you to give the lender some kind of collateral in exchange for them lending the money to you. Typically, these are short term loans at higher-than-market-value interest rates. But, if you need money, this type of loan can help you keep your power on, buy food until your next payday, or pay for an unexpected auto repair. If you are considering taking out this type of loan, you may have many questions. Here are a few frequently asked questions about cash collateral loans.
What Type of Collateral Can Be Used for Securing the Loan?
Typically, there are two different types of collateral that are used for securing a loan. The first is a car title. You sign the title of your car over to the lender and in exchange, they give you a cash loan. They hold the title of your car until the loan is up, but you are able to continue to drive and use your car. The second type of collateral typically used for securing loans is jewelry, antiques, and other smaller items of value. A pawn shop or jewelry lender like Wilmington Jewelry & Loan will hold the item of value in exchange for cash. Once you pay the loan off, your item is returned to you.
What Happens to the Collateral If You Cannot Pay Off the Loan?
If you are unable to pay off the loan, your item can be sold. This is why those with bad credit are able to obtain this type of loan even though they may not have the best repayment track record. There is very little risk to the lender, as they have something of value in exchange for their loan. If you fail to pay, they can sell the item to recoup their money.
Can You Save the Collateral By Filing Bankruptcy?
Filing for bankruptcy can often stop debt collection. As such, if you are having trouble paying a secured loan, you may be wondering if filing for bankruptcy can help you to get your item back or stop it from being sold. Unfortunately, filing for bankruptcy cannot help stall or stop the sale of your items. The collateral is not considered to be owned by you, and therefore, can be sold if you are not meeting the terms of the loan. If you are struggling to pay your loan, talk to the lender. Many may be able to extend the terms of the loan if you can pay the interest due on the loan.
A cash collateral, or secured loan, can help you get money you need to pay an unexpected bill if you have bad credit. Taking the time to get your questions answered can help you make an informed decision as to whether a short term collateral loan is best for your situation.