How to Prove Collateral For Personal Loans From a Bank
If you are seeking a personal loan from a bank, the bank may want collateral, or security, to ensure the loan is repaid in full. This is a normal function of banking and you should not feel offended if the bank asks what type of collateral you have.
So how do you prove to your bank the type of collateral you have? In most cases, it can be easy. First, you will begin by completing a financial statement with your bank. In this document, you will list your income, your debts and your assets, or property you own. The property is what the bank is interested in as collateral. But the financial statement merely discloses your property, it does not prove you own the property listed.
How you prove you own this property depends on the type of property owned.
Proving Your Collateral
The following is a list of valuable personal items that can be used as collateral for financial lending and loans. There are other items that banks will and will not consider as acceptable collateral but use this as a collateral guideline.
This form of property is one of the easiest forms of ownership to prove. You will have a deed to the property. Since real estate transactions, including real estate loans, are more complex than most loans. A bank may require title insurance, which will list ownership of the property, along with all liens outstanding on the property.
For vehicles such as cars, trucks, SUV’s, motorcycles, boats and other vehicles, you will have a Certificate of Title issued by your state’s Department of Motor Vehicles. It will list the Vehicle Identification Number (VIN) for the property, together with your name and address. It will also show if any other entity has a lien on the property.
Note that a bank might not accept a registration statement as proof of ownership. The reason is that registration statements often do not list lien holders on the vehicle. Be sure to provide the Certificate of Title itself. If you have lost it, contact your Department of Motor Vehicles for a replacement title. There may be a fee involved, but you may not be able to obtain your personal loan otherwise.
Stocks and Securities
If you happen to own stocks or marketable securities and are offering them as collateral, obtain the stock certificates. If they are held by a brokerage, you might be able to allow the bank permission to contact the brokerage for proof of ownership.
Gold, Silver and Jewelry
If a bank is willing to take these items as collateral, possession of the precious metals or jewelry is the form of proof they will most likely require. They may also require receipts for purchase, to prove you actually own them. In addition, they may require that they maintain possession of these items until the loan is repaid. They will also require some form of documentation that authenticates the value of these precious metals and jewelry. Remember that not all personal possessions can be used as collateral for a bank loan. The collateral must be valuable for the bank.
If you own your own business, and your bank is willing, you may be able to pledge your accounts receivable, or the money owed to you, as collateral. Proof is a little more difficult, and the extent of proof varies from bank to bank. At minimum, the bank will require a listing of who owes money to you, the amount owed, and for how long the amount has been owed. The bank may require an acknowledgment from your customer demonstrating that the amount is, in fact, owed.
This list is not meant to be exclusive, as a bank may accept other forms of collateral. But the list is some of the more common types of collateral used, and how to prove to the bank that the property is owned by you.
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