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Financial Question: Collateral  
User currently offlineUA777222 From United States of America, joined Dec 2003, 3348 posts, RR: 11
Posted (4 years 5 months 3 weeks 4 days 16 hours ago) and read 1205 times:

With a private party loan, unassociated to any financial institution, what can be considered collateral? It is any mutually agreed valued item?

If anyone with financial knowledge knows of common collateral that is not real estate or a vehicle and the security in taking such as collateral, I'd greatly appreciate it.

I'm in the process of considering giving a loan to someone and they're offering hard collateral that's valued about 1.5x the loan amount but is multiple high value items.

Greatly appreciate it.


"It wasn't raining when Noah built the ark."
3 replies: All unread, jump to last
 
User currently offlineSCCutler From United States of America, joined Jan 2000, 5484 posts, RR: 28
Reply 1, posted (4 years 5 months 3 weeks 4 days 16 hours ago) and read 1193 times:

Generally speaking, you can pledge anything you own free and clear as security for a loan (provided its transfer is not in any way restricted by law).

Easiest way to perfect the security interest is to transfer possession of the security to the secured party (that is, in essence, all a pawn broker does).

A simple Note and Security Agreement can serve nicely; call a reasonably-priced lawyer.



...three miles from BRONS, clear for the ILS one five approach...
User currently offlineUA777222 From United States of America, joined Dec 2003, 3348 posts, RR: 11
Reply 2, posted (4 years 5 months 3 weeks 4 days 16 hours ago) and read 1187 times:

He would like to keep the collateral items, ie: no escrow, 3rd party, etc.

His financials look good and has good credit, this is a loan request for business equipment. Can I ask that the equipment be collateral?

Thanks.



"It wasn't raining when Noah built the ark."
User currently offlineSCCutler From United States of America, joined Jan 2000, 5484 posts, RR: 28
Reply 3, posted (4 years 5 months 3 weeks 4 days 7 hours ago) and read 1149 times:

You need to consult with counsel.

Is the equipment / property proposed as collateral, the kind for which ownership is passed by a certificate of title (such as an automobile, or other licensed property)? If so, you can hold the title as security.

If not, you obviously run a significant risk by loaning against property which you cannot effectively control.

You can record "Financing Statements" which might serve to improve your security, but it would still not be a guarantee of payment.

In addition, I'd be extremely wary of someone who wants to borrow money from you, and is dictating terms.

You really need to consult a qualified lawyer in your own jurisdiction; loaning money is not something you should do lightly.



...three miles from BRONS, clear for the ILS one five approach...
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