Although pledging is not a verb that we use in our day to day; If you are in the process of buying a house or any other property, perhaps you have found the option of pledging a loan . You do not know what it means? Don't worry, let's explain it to you.
What is a pledge loan
As you know, when applying for a loan you must offer a guarantee that you will return it. In general, that guarantee is your equity, both the one you already own and the one you will have in the future. There are times when the entity that is going to make the loan asks you for an additional guarantee, the pledge of an asset . This means that they are asking you to put one of your assets in their hands, such as a car, a house or a bank deposit, among others. Its value must correspond to the money that is going to be loaned to you.
This pledge of the property must be recorded in a public deed ; and when you finish returning the entire amount, the good will return to your hands.
What about the pledged asset
Now, if they ask you for that additional guarantee, you should know that you will not be able to use the garment that you have put as guarantee until you have returned the money in full . Let's take the example that you put your vehicle on pledge, then you won't even be able to drive it; neither sell it nor move it until you have finished paying the debt.
If you fail to comply with this clause, the bank or the lender that has put the money may sell the property at a public auction. And if you want to keep it, you will have to purchase it at that auction.
Now, if you have indicated as well pledged some shares or any other financial product; You can use the benefits as part of the return of the capital that they have left you.
What are the benefits of pledging a loan
If you are thinking of accessing a loan of these characteristics, keep in mind that:
- As we already explained, you will not be able to have it, but you will be able to have the profitability it generates. That is, you will not be able to sell some shares, but you can collect the benefits.
- The expenses involved in its formalization are lower than those of a mortgage loan. You also won't have to double-write.
- In general, the applied interest is very attractive. Therefore, there are no commissions for amortization or cancellation in advance.
- You will not pay taxes on the financial asset while it is pledged.
What you should keep in mind is that this type of loan is usually only offered to people who have a minimum equity of about 80,000 to 100,000 euros . In addition, the terms are usually between 8 and 10 years (less than a mortgage). So, if you want to choose to pledge a loan, you already know what conditions you have to meet. Get financing of up to € 100,000 in Ideal Loans .