Personal Investment & Loan Tips : Collateral Loan Tips

This is financial adviser Patrick Munro talking
about collateral loans. In the world of lending in todays banking environment collateral loans
are very, very common. What it is, is essentially where you as the borrower put up an asset
that has value to a financial institution and then based on that value or a percentage
of that value the financial institution will in turn give you money back. And it’s a common
way of lending practices, it’s designed to protect the company making the loan so that
they will receive a repayment. In the case of the home if you do not make the payments
the rights of the borrower are rescinded and the borrowing institution can come in and
foreclose on the property. And therefore take it back and it becomes REO which is real estate
owned. The banks do not like this, they’re not in the property business, they’re in the
interest business and as a result many banks are now taking on collateral that they originally
had placed for these loans. This is Patrick Munro talking about collateral loans.

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