Secured Business Loans – Getting Over the Consequences
A popular type of loan among business owners is the secured business loan. As the name implies, these business loans are guaranteed or “secured” by submitting a property or an asset. Because the loan is guaranteed by the collateral, the lender has the right to resell the property submitted in case the borrower defaults on payments. Thus, secured loans have significantly lower interest rates than unsecured loans.
It is not surprising that most entrepreneurs prefer to apply for a secured loan than an unsecured one. Even large company owners take advantage of the low rates by submitting their commercial assets as collateral for the loan. If you’re a home based business owner or small business entrepreneur, you can certainly save more with a secured business loan.
Being Aware of the Consequences
Along with the low rates, it is true that secured loans also have risks. If you’re going to submit your home as collateral you can lose your home to your lender if you fail to keep up with your payments. As a business owner, you should take this matter into careful consideration before rushing to submit your loan application. Nevertheless, the risk of losing the collateral can be eliminated by making sure that you will submit your monthly payments on time.
Three consecutive delays with your payments would put you in a dangerous situation. However, even a single delay can send out the alarm to your lender. If you know that you will not be able to submit on your due date, the best move is to call your lender immediately and explain you situation.
Most lenders would be willing to extend your due date for 30 days to give you a chance to keep up. Don’t hesitate to request your lender not to report your late payment to the credit bureaus. This way, you can ensure that your credit history is also protected. By giving your lender the advance notice, you show your sincerity and willingness to pay your debts.
Managing Your Debts
Still, you can’t keep on requesting for an extension of your due date all the time. To keep up with your loan payments, avoid unnecessary expenses and pay close attention to how you utilize your finances. Remember, once you’ve taken out a business loan, you are responsible to make your payments on time.
When choosing a secured business loan, carefully study your options. If you have good or excellent credit, take advantage of the chance to ask for lower rates and better terms from your lender. Bear in mind that lending companies want clients with impressive credit history. On the other hand, if you have poor credit, you can also apply for a bad credit secured loan to rebuild your business credit.
Lastly, see to it that you have read and understand your business loan agreement before signing up your contract. To be sure, hire a business lawyer to check the legality and fairness of your business loan contract.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2009.
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