If you are short on cash and are unable to apply for a regular bank loan due to bad credit, perhaps you should be considering a collateral loan. These types of loans provide you with quick cash with the exchange of a particular asset. For example, you could get a loan worth $5,000 by putting your car as collateral. This is just one example, and there are many other types of collateral loans.
Here are five reasons why you should consider getting a collateral loan:
1. Quick Cash
The biggest advantage to a collateral loan is that it provides you with a source of quick cash. Collateral loans can be tied up within a few days, whereas bank loans can take weeks for approval to come through. If you contacted a lender about a collateral loan on Monday, you could have the cash with you on Wednesday or Thursday.
Collateral loans are perfect if you have unexpected bills/expenses to deal with, a delay in your next paycheck, or an emergency situation that requires a significant amount of money.
2. Lower Interest Rates
If you are in need of quick cash, collateral loans are probably your lowest interest rate solution. Other quick cash loans, such as payday loans, come with much higher interest rates because of the risks involved for the lender. With a collateral loan, your asset is being used as a guarantee on the amount owed. If you are unable to pay the loan back, the asset is taken by the lender. This allows them to take on lesser risk, and that leads to a much lower interest rate.
3. Higher Initial Borrowing Amounts
Collateral loans come with more options than any other quick cash loans. Payday loans cannot be taken out for more than $1,000. In comparison, a collateral loan is often taken out at 50% of the value of your collateral. If your car is worth $10,000, you can get a collateral loan for up to $5,000.
4. Make Timely Payments -> Borrow More Cash
If you take out $5,000 as a collateral loan, it is still possible for you to borrow more. As long as you make routine monthly payments in the manner they were agreed on, you are eligible to borrow further money against your collateral. This is a great option for anyone who may be going through a period where they need a quick injection of cash for a few months, instead of a few weeks.
5. Flexible Payment Plans
Unlike other quick cash loans, there is no specific date for complete payback of a collateral loan. There may be a vague date agreed between both parties, but this can often be extended as long as regular monthly payments are being made. This feature allows the borrower the time and flexibility they need to get in a healthy financial situation before completely paying back the loan.
Track All Your Accounts With Personal Capital
Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.There is nothing wrong with admitting that you need help when you are in a difficult financial situation. Instead of taking out high interest loans or letting your bills fall back to another month, look at collateral loans as an option. These loans offer higher borrowing amounts, lower interest rates, very flexible payback dates, and many more advantages. They are perfect for anyone who needs cash right now.
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