Bank StudyUpdate

Types of loan securities which bank ordinarily receive from client

Types of loan securities is something of value given to a lender by a borrower to support his or her intention to repay. In the case of a mortgage, the security is the property that the loan is being used to purchase. It may include tangible, intangible assets, or even a personal guarantee.

Types of loan securities for Bank Credit


Personal securities:
When a bank lends to a borrower on the security of a third party. Then it is called lending on personal security. In the case of personal security, one has to look at the financial status, character, reputation, amount of debt, etc. of the guarantor. In the case of personal collateral, if the borrower is unable to repay the loan with interest on maturity, the guarantor is obliged to repay the loan. personal security consists of three parties. Such as: (1) Lender (Bank); (2) the borrower; (3) Guarantor. .

Non-personal Security
Non-personal security refers to movable and immovable tangible properties against which loans are granted. This type of security may include land, building, commodities, etc.

Non-personal security is safer than personal security. If the borrower defaults, the tangible property can be sold in the market to realize the unpaid amount. Non-personal security can be charged by pledge, mortgage, hypothecation, assignment , set off or lien.

1.Immovable Property: Banks often take security on various types of immovable property such as land, houses, buildings, etc. as collateral during the lending period. Before taking immovable property as collateral, the bank seriously considers the ownership, immunity and value of the property.

2. Goods and products as security: As a guarantee of loan repayment, banks often provide loans by mortgaging the goods or mortgaging the warehouse keys. In this case, even if the owner owns the product, the borrower can sell the product until the loan is repaid as the possession is with the bank.In this case, if the borrower fails to repay the loan, the bank can collect the loan money by selling the goods. The most advantage of such collateral is that the goods can be sold easily.

4. Marketable securities: Marketable securities such as exchange bills, shares, stocks, debentures, etc. are used as collateral for loans. These securities are very secure in modern loan system.

5. Documents: Debts with securities of modern goods as collateral for loans. Banks usually lend against the following documents. Such as- Carriage of imported goods, railway receipt, dock receipt, warehouse receipt, dock warrant, chartered party receipt etc. At the time of lending, the bank retains the imported goods of these documents and takes necessary action.

6. Valuable goods: Valuable goods such as gold ornaments, pearls, diamonds, etc. are often used as collateral for conventional loans. Disburses the loan amount within the stipulated time. The borrower returns the goods. In case of failure, the bank sells it and arranges for the recovery of the loan.

Different types of loan security, discuss advantages and disadvantage

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