Collateralized loans require an asset of value to stand as security for the loan in the same way a property secures a mortgage. In business terms, equipment, vehicles, property or other assets of value can stand as collateral or security for the loan. If the loan is not repaid, the collateral is taken by the lender and sold to recover the loan amount. A bad credit history therefore has less of an impact on loan approval.
In addition, a collateralized loan offers the following benefits:
1. Fast Approval
Because collateralized loans have fewer requirements and less strict qualification criteria, the application process is much faster than getting a regular business loan approved. Regular loans can take weeks to be approved whereas a collateralized loan is commonly approved within a day or so. It is the ideal solution to access funds when you need them in a hurry.
2. Short-term
When it comes to borrowing money, repaying the debt as quickly as possible should always be a priority. Collateralized loans are short-term which means they have a relatively short repayment period – usually under 2 years. This is beneficial because it means paying less interest over a shorter period. The terms of these loans are flexible which means that you can choose a repayment period that best suits your needs and the business budget. However, this does mean that the loans are not suitable for funding long-term projects or expansions.
3. Lower Interest
Short-term loans generally have higher interest rates than loans that offer longer terms. For example, a personal loan is going to have a much higher interest rate than a mortgage or vehicle finance. However, in most cases, a collateralized loan is going to have a lower interest rate than a regular business loan. This is because there is less risk associated with a loan that offers security.
Collateralized loans are therefore the ideal solution for businesses with a bad credit score. Bad credit doesn’t always mean that a business loan will be denied but may mean that you pay more in interest and other charges because you pose a greater risk that the loan will go unpaid.
4. Easy Approval
If you have applied for a business loan but it has been denied, it is probably because you or your business does not have a good credit record. Offering collateral for a loan is a good way to get approval. Collateral offers security for the loan making the application and approval process much simpler.
Where Can I Find A Collateralized Business Loan For Bad Credit?
Blursoft.com will compare various collateralized business loan products and connect you with the right financial solution to meet your business needs.
