Covered personal loan

A covered personal loan (also known as a mortgage loan) is based on the securing of countervalues by the borrower. The lender, such as banks or savings banks, use these securities as a lien in the event that the monthly instalments are not repaid. Such a form of credit requires that the impeccable creditworthiness of a borrower is not guaranteed. The creditworthiness is determined by checking the previous financial transactions of an applicant. Data from the existing documents of the credit agencies for finance are used for this purpose. Credit agencies such as Schufa or Infoscore store certain processes of a citizen that refer to publicly available financial data. In addition to the personal master data, there is also data on debts arising from transactions, bank overdrafts, existing or redeemed credits, consumer credits and similar actions of the citizen.

If a credit institution to which a citizen has applied for a loan determines an incriminating creditworthiness, the lender will fall back on a covered personal loan. This is the only way to secure lending in many cases. A covered personal loan is thus burdened by a higher interest rate. This is because the lender acts with an increased risk when granting credit.

These securities are generally accepted

For the granting of a personal loan, borrowers can use different types of security. Movable goods such as vehicles, paintings or valuable jewellery serve as credit security. As soon as these are used as collateral for a loan, the sale by the owner is prohibited. Although the borrower remains the owner of the movable property, he may not sell, give away or inherit it. In the case of vehicles, the vehicle registration document is usually lodged with the credit institution as security. who will subsequently exercise his lien as soon as the borrower defaults on his instalments. However, the lender is requested to make a payment in advance before the legal process claims the lien on the lender.

Likewise, a covered personal loan may be covered by financial collateral. Building saving contracts, life insurance policies or government bonds and savings bonds as well as shares serve as security. In addition, real estate, investments in such properties or land serve as attachable property. Entrepreneurs can guarantee a loan through company values.

If you want to avoid securing your credit, you should first adjust your creditworthiness. Under certain circumstances, this can take a lot of time, which is not feasible with quickly needed loans.

Alternative collateral for a covered personal loan

A covered personal loan can also be secured without own assets. In this case it is necessary to secure a guarantor. In this case, the borrower secures a loan with borrowed capital. For companies this means that they can be secured by other companies. In practice, this is as follows:
Company A needs a loan for operational security or would like to invest in innovative ideas. A further uncovered personal loan is not possible due to outstanding receivables. The company’s assets are not sufficient to cover a loan. The company thus has the loan secured by an external company or subsidiary. The latter acts as guarantor and is liable with its own cover assets.

This is hardly any different for private individuals. A covered personal loan can be covered by a guarantee insurance, if recognised by the lender, or by a private or commercial guarantor. The role of guarantor can be played by relatives, friends, acquaintances or even employers. can be taken over. It is important that their assets or equity capital are sufficient to cover the loan. It should be noted that a covered personal loan with guarantor only makes sense if the guarantor himself is solvent and his creditworthiness is not negatively impaired.