Credit security is a top priority for banks when it comes to making a profit from lending money, because what use is the potential gain, if it does not even materialize, even more, turns into loss. Collateral security minimizes the risk of repayment default, albeit not completely excluded.
As a credit security, various (legal) funds are available to the banks.
In this case, personal credit security can be resorted to – the creditor satisfies his claim, for example, by claiming a claim, or the pertinent credit security comes into effect if the bank accesses certain items whose value is a substitute benefit are reserved for the creditor. As a result, a distinction will generally be made between personal and objective credit security.
Personal security includes, as already mentioned in the above example, the company ( 765 BGB), the guarantee, the assumption of debt ( 421 BGB) and the letter of comfort.
The objective collateral security applies with the assignment, the assignment of security ( 929, 930 BGB) and the lien ( 1204 ff. And 1273 ff. BGB). Naturally, the mortgage ( 1113 et seq. BGB) and the mortgage ( 1191 et seq. BGB) are objective collateral.
Material collateral does not have to be limited to a single lender. Since large loans are often put together by several banks, factual loan collateral can also be made available to them at the same time. In such cases, there is talk of a collateral pool.
Description of bankable collateral
Mortgage Liens Basic loans are often used to secure loans. These are not to be confused with the mortgage, which can not be used to secure additional loans and therefore does not come into play here. The mortgage is entered in the land register. The rank is crucial, because first-rank registered land charges are redeemed first, if it comes to the very first.
Cessions Smaller loans, which are the rule in the private customer’s country, find security through pay and salary assignments. Corresponding clauses are already contained in the loan agreements and represent a comfortable factual security for the bank. If the customer no longer pays, the salary is simply tapped. An assignment of insurance has the same purpose. Here it depends on the purpose, which insurance is assigned to what, namely a building loan is covered by a fire insurance against the risk of fire financing a car requires proof of comprehensive insurance and in addition there are a few other material credit protection such as the residual debt insurance, among others
Loans for self-employed and freelancers are often confused with the assignment of claims, which occupies the place of the wage and salary assignment. For example, doctors can offer their claims to the medical association as collateral for a loan.
Also, the pledge of securities holdings is part of the objective credit protection, since the thing – the security is created as collateral. However, this type of security is most likely to apply to pawnbroking.