Collateral loans sometimes get a bad rap but they can work wonders if you plan right.
Some people will try to tell you that pawning an item, or using your valuables to back a collateral loan, is never a good idea because of the high interest rates involved. This may be true for a person that is flat broke, but the reality is that collateral loans can prove very helpful when used wisely by financially solvent individuals. With no credit or income checks required, collateral loans enable individuals to secure the immediate cash they need without any hassles or delays, and without affecting their credit score. There are many scenarios where a collateral loan would enable a person to achieve their financial goals. It just takes a bit of planning and consideration to make sure it will work. Here are 3 important things to consider before you decide to get your next collateral loan.
Do You Have a Plan for Repaying the Loan?
Collateral loans work best in situations where you have a temporary cash deficit, but know that you will soon have enough cash to repay the loan and recover your item. It is very important that you fully understand the loan terms and have a plan for repaying the principal and the interest on time if you want to recover your item. If you aren’t confident you will be able to pay, you might want to consider selling the item instead.
Can You Live Without the Item?
Of course, the potential for the unexpected always exists. Maybe that raise or stock sale you think is in the bag won’t materialize after all, and you’ll be left with no way to repay your collateral loan. In this case, you might have to forfeit the item you used as collateral. This would be the worst case scenario, but when planning to take out a collateral loan you should definitely consider it and make sure you are comfortable with the risk of losing your item to default, no matter how small that risk might be.
Do You Really Need the Cash?
One final point to consider is whether you really need the cash. You have to balance your need against the risk of a loan. This would be true of any loan you were to take out, including a bank loan or a credit advance. For example, if the late fee for missing a mortgage payment would be less than the interest on your collateral loan, you might want to think twice about taking out a loan.
If you are interested in getting more details about the amount of cash you could secure and the interest rates that would apply to your loan, just stop by Gems & Jewelry Inc. for an appraisal of your collateral and a loan term offer.
