Types of collateral that can be used for getting a Loan

Getting a loan has become a lot simpler nowadays. Gone are the days when you had to run from one bank to the other, submit loads of documents and then wait endlessly just to know if your loan was sanctioned! These days, the process is very simple, and many lenders even offer loans online, in just a few minutes. There are two types of loans – secured and unsecured loans. While the unsecured loans don’t require collateral, the secured loans require some form of collateral. As a result, secured loans are available at a lower rate of interest. Take a look at this article to know what types of collateral loans you can use to get a secured loan with ease successfully.

Types of collaterals for secured loans

When taking a secured loan, you can pledge the following as collateral:


This is one of the most common types of collateral that you can pledge when applying for a loan. Loan against property is, in fact, one of the most popular forms of short term financing. People opt for this loan when starting a business, when faced with a medical emergency or when they need to clear some personal milestones like a wedding or a foreign education course. Loan against property is easy to get if you have real estate in your name. There are a few risks involved here, though. For instance, if the residential property is pledged as collateral and the loan is not cleared, the borrower and his family may lose the roof above their heads. However, if the loan is cleared on time, it indeed proves to be a very helpful source of financing.


Apart from property, you can also pledge the equipment you own. This option is very commonly used by factory and industry owners when they need financing for their companies. You can get a loan that is equivalent (or a little less) to the value of the equipment you decide to pledge. Some equipment is considered to be more valuable than others. For instance, a very heavy factory machine may be difficult to resale, and so the lender may not consider it as suitable collateral. A new, modern laptop, on the other hand, will act as excellent collateral. If the collateral works in your favor, you can get the loan quickly and easily. Many banks and NBFCs offer this loan.


Inventory acts as a brilliant form of collateral for loans. Banks and other lenders prefer using inventory as collateral as they are easy to take stock of and also liquidate. If you have some inventory lying around, consider taking a loan against them to meet your immediate financial requirements.


An invoice can be used as loan collateral. If you are waiting for a payment to come in, simply hand over the invoice to the lender. You will be given the same amount, and when the payment comes in, the lender will take it, and the loan will be cleared.


These are some very types of collaterals that business owners use to get loans. Loan against property, loan against inventory, loan against invoice, etc are now more commonly found. Many lenders have these loans on offer and that too at an attractive home loan rate of interest. 

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