ua777222
Posts: 2987
Joined: Mon Dec 22, 2003 11:23 am

Financial Question: Collateral

Tue Jan 19, 2010 4:25 am

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."
 
sccutler
Posts: 5555
Joined: Thu Jan 27, 2000 12:16 pm

RE: Financial Question: Collateral

Tue Jan 19, 2010 4:41 am

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...
 
ua777222
Posts: 2987
Joined: Mon Dec 22, 2003 11:23 am

RE: Financial Question: Collateral

Tue Jan 19, 2010 5:02 am

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."
 
sccutler
Posts: 5555
Joined: Thu Jan 27, 2000 12:16 pm

RE: Financial Question: Collateral

Tue Jan 19, 2010 1:44 pm

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...

Who is online

Users browsing this forum: DLFREEBIRD, ssteve, VapourTrails and 52 guests