Is Collateral Mandatory for Loans

[Mika]

The purpose of collateral is to secure your loan. Banks ask for collateral in order to get back their investment in a situation you cannot pay back. You can use land, house, gold, stocks, etc. as collateral when applying for a loan from banks. You also need to provide proof of income to convince the bank that you can repay. However, there are financial institutions that do not need collateral, for instance microfinance and saving and credit cooperatives also do not ask for collateral but you still need to get guarantor for loan approval. You might also need to be a share holder in these companies.

 

[Highs]

Collateral is very important. We have seen cases where some people take loan and run away. Some even travel out of the country especially when to took huge loan. As a creditor your should take measures to protect yourself against this act. So many people are looking forward to do this but then you scare them off with collateral. Make sure you make findings and ensure they own the property they use as collateral and make sure the agreement is well stated.

 

[Monster Masterpiece]

Sometimes this doesn't work. Banks give loans to people that pay in time and could use the loan for other purposes like purchase a new car or a new house or even to go to vacations and doesn't give loans to people that are in need for that money. Getting loan from bank got deprecated. Now people goes to individuals to get loans with higher interest but could solve their small problems even for a while.

 

[Spencer]

Not all loans demands a collateral, I've had some experience with online loans and most of them do not request for any collateral, all you have to do is submit your bank statement and give them access to copy your contacts.

And they give you a loan that matches with your income on your bank statement, but it's a different ball game altogether if you're trying to secure a commercial bank's loan, they need a lot of supporting documents before they disburse a loan.