Introduction
An asset loan is a loan that is given for a certain time period and is held against assets that a company or individual owns. This is somewhat like a collateral loan, but not entirely. In a collateral loan, you are loaned money with the stipulation that if you do not repay that you lose your collateral. In an asset loan, the amount of money being loaned is based on your held assets. The assets are held just like in a collateral loan. You will mostly see this loan being conducted in commercial real estate situations, but not always. Sometimes individual borrowers can get an asset loan.
Step 1
As with any loan, it is important that you check your options carefully before deciding on a lender. Not all lenders will offer you the same loan package so keep this in mind when you are shopping around for an asset loan. You want to be sure that the loan terms will work in your favor and that you understand the repayment of your loan is imperative. Your assets will be garnished after a certain period of non-repayment! If you understand the terms and feel that the loan fits you or your business well, then you will need to agree to those terms to set forth your loan.
Step 2
An asset loan can be obtained regardless of your credit rating, because the loan is basically a secured loan because of the assets attached to it. Many people find that they have trouble repaying these loans while they are working on selling the property attached to the loan. If a property does not sell, they may end up defaulting on the loan and losing their asset property, which can be devastating. This is why it is important to be careful when choosing a loan so that you do not get into hot water and in over your head!
Step 3
Asset loans are usually given for about fifty percent of the asset value. The lender wants to be sure that if you do default that they will still make money on your assets to reclaim what they loaned you. You will be given many fees if you do default on the loan. These can include past due interest on the loan and even taxes that are due on the asset. The lender will typically tack on lawyer fees and collection fees that can have you owing much more than you ever originally borrowed. If you are sure a property is not going to sell, it is best to avoid this type of loan at all costs!
Step 4
If you must get this type of asset loan, just remember to check your lender out before you sign. Check with the Better Business Bureau to be sure that the lender is legit and does not have a bad record with customers. You can do a search online and read many reviews from current and previous customers to get a good idea of the lenders rating. This can be invaluable in your asset loan search and is something you should not borrow without conducting!
Step 5
It is important that you make your asset loan payments on time to avoid added fees such as late fees and interest. Paying your payments on time will help your credit score and will keep you from losing your property. If for some reason you find you are unable to make the payments for a specified time, some lenders will allow for second mortgages as long as the property maintains a certain value ratio. This can also be risky because then you have two liens that need to be repaid! In the world of money lending, asset loans are lower on the totem pole because of the terms they often give. Some people have no choice but to enter into one of these loans, but it is advisable to be careful and weigh each option that you have before making any decisions!
Tips
Choose your lender wisely!
Weigh all of your options!
Do a search for reviews!
Know your loan terms!
Sources and Citations
www.inc.com
