The credit collateral listed above all belongs to the subject collateral or real collateral. The creditors receive the rights to the realization of a claim, a valuable item or the like. These include the assignment, the land charge, the mortgage, the transfer by way of security and the lien.
Another form of credit protection is personnel security. A third person is liable if the borrower is unable to repay the loan. This includes the guarantee, the guarantee, the assumption of debt and the letter of comfort. For personnel and property collateral, the security of the loan should correspond to the value of the loan amount. Among other things, this means that guarantors should have a high credit rating.
Additional and fiduciary loan collateral
Credit protection can still be differentiated according to the existence of the claim. Accordingly, a distinction is made between ancillary and fiduciary collateral. It is accessory security if the credit protection depends on the claim. This dependency ends with the repayment of the loan so that the loan security expires automatically. These include the guarantee, the lien and the mortgage.
If the claim is independent of the loan security, it is a fiduciary security – also known as abstract security. This means that even if the loan has been repaid, the credit protection can continue to exist. These include the guarantee, the land charge, the joining of the debt, the transfer by way of security and the assignment of security (security assignment).
Installment loan collateral
With installment loans, a distinction must be made between employees and the self-employed on the one hand and the use of funds on the other. The lending process for installment loans is very lean on the bank side. The position of the collateral is based on this lean process.
Loan guarantees for employees and pensioners
If an employee wishes to take out a loan, the assignment of salary is the only loan security that the bank requires. Pensioners cede their pension rights accordingly. This enables the creditor to pledge his salary or pension should the borrower default.
Although banks are collateral takers, they are not collateral users. The realization of loan collateral is often cumbersome for the creditor and involves additional costs. If a borrower is actually unable to meet his obligations, there are numerous ways to reach an agreement:
- Some providers give their customers the option of a payment break. This can be used once or twice a year.
- Extending the term leads to a reduction in the rate in order to create liquidity again.
- Suspension of repayment is another way of reducing the monthly charge. Only the interest is paid for a certain period of time, similar to a final loan.
Even though assignment of wages is the standard for securing an installment loan, attachment is at the end of all other options.
Credit protection for the self-employed
Since the self-employed usually do not regularly have the same high income, an assignment of salary is usually not an option. Against this background, many credit institutions are also reluctant to lend to self-employed persons, as an examination of other collateral would inflate the “lean” lending process and reduce the interest margin due to the costs involved. The following options are available to self-employed persons as collateral:
- A land charge can be entered on a property.
- The assignment of a life insurance policy with a corresponding surrender value is considered an excellent solution.
- The assignment of securities is possible up to a certain loan-to-value ratio. This depends on whether it is stocks or bonds.
Loan security on a car loan
With a special car loan, some banks offer a special form of credit protection. As part of a transfer by way of security, the borrower transfers the second part of the admission certificate to the financing bank. This gives the creditor direct access to the vehicle. If the debtor is unable to repay his liabilities, the bank has the option of reselling the car. This would not be the case with fitted kitchen financing. This makes the borrower less flexible – for example, he cannot sell the financed car himself during the loan period. In return, the banks offer slightly more favorable conditions than with a free use.