In the vast majority of cases, banks do not expect collateral for consumer credit. However, it may happen that in a given case they decide to apply security. So the question arises what are the currently used methods of securing consumer credit. What can banks have today in this case?
Currently, the most frequently chosen method of securing consumer credit. This type of collateral is chosen by banks when the borrower does not have high creditworthiness. In the case of a surety, a third party agrees to repay the liability when the borrower stops doing so.
In this case, part of the risk associated with the repayment of the loan is taken over by the insurance company. If the insurance premiums are paid regularly, the insurer takes over the obligation to pay the bank if the loan is difficult to pay. Without a doubt, this is a very good form of consumer credit insurance that really gets charged.
Bill of exchange
It is nothing else but a kind of promise that a certain amount will be repaid on the given date. In the case of collateral for a loan, the promissory note has a blank form. The amount of space remains empty. The bank enters it itself, depending on the outstanding debt.
The contract specifies the amount to be paid to the bank. If we do not pay our debts on time, the deposit will be taken over by the bank to cover the liability. In the case of repayment of subsequent installments on time, the deposit will be returned to us after the end of the loan period. Many specialists emphasize that this is a really good way to secure the loan.
These ways of securing credit for consumer loans are not used very often. This does not mean, however, that there is no bank that decides not to use collateral. After all, banks are doing everything to defend their interests as well as possible. And security is just one way.