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Is it worth taking out loans against collateral?


The loan is a product available in financial institutions, not only in banks, but also in non-bank companies. To receive it, the borrower must meet certain conditions set by the lender. It is possible that he will have to provide a collateral acceptable to the entity in order to obtain the loan. A pledge may be such collateral. Is it worth taking a loan against the loan?

Secured loans have tangible collateral that reduces the risk borne by the lender, so they allow you to contract quickly and effectively, even a larger financial commitment. 

Pledge as a form of security

Pledge as a form of security

The Civil Code gives the possibility of establishing a pledge, i.e. a limited right in rem, on movable property or transferable rights in order to secure the debt and it is one of the forms of material collateral. The parties to the pledge is the pledgee, i.e. the creditor, whose claim will be secured by a pledge, and the pledgee, i.e. the party who has pledged his property.

If a non-bank entity offers a loan in exchange for pledging a house or apartment, it is likely doing so illegally. Very often, the conclusion of the loan agreement in this case is the conclusion of a notarial contract of sale of real estatewith a future repurchase right if the loan is repaid on time. It is also possible to conclude a notarial loan agreement with a pledge on the property, which can also lead to extortion of the house or apartment from the borrower.

When is a loan worth paying for?

When is a loan worth paying for?

While the collateral for the loan is not a property, for example a car or other property right, it is worth considering such a possibility, if for various reasons the customer cannot count on getting financing from a commercial bank, has a bad credit history and too low creditworthiness. The pledge will cause that he will be able to secure the claim and the lender will be able to simultaneously reduce the risk incurred in connection with the loan granted.

From the borrower’s perspective, the pledge means that you can limit the formalities related to the loan to a minimum, flexibly adjust its conditions to financial capabilities and quickly obtain payment of money from the given commitment. When we need a larger loan amount, a pledge may become the only option to borrow it.

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