Protected Loan: what does it mean?
One of the most frequent questions that are asked when applying for a bank loan or when applying for a private loan is the following: can I have a secured loan?
Before analyzing the requirements for obtaining a secured loan, it is good to specify what a secured loan is.
The protected loan, in essence, regardless of the amount disbursed and obtained, ensures the remuneration of the debtor in case of insolvency of the due installment. The protected loan is requested in order to avoid, in the event of the debtor’s insolvency, being registered in the list of bad payers or to terminate the contractual debtor relationship, with all the negative consequences of the case (establishment of a dispute). With the secured loan, we can say that the bank or lender and the client are fully protected in case of:
- Failure to pay the installment for sudden death of the debtor;
- For cancellation, dissolution, nullity of the signed, voluntary or indirect agreement of the bad payer;
- For mental, partial or total or corporal dysfunctions of the debtor;
- For an important stay in the hospital of the insolvent, following a serious dysfunction.
Requirements for having a secured loan:
- be Italian citizens;
- be of age;
- possess a provable profit (i.e. having a paycheck, a pension);
- various guarantees, such as land, homes, offices owned by the debtor or various major rental annuities.
Following the production of the documents specified above, the bank or credit institution will examine the requirements of the alleged customer.
After receiving the necessary documents, the application for funding will be examined in detail. If the debtor’s application were to be accepted, the interest rate to be applied to the financing plan will be examined, providing, on request, to plan the protected loan, by stipulating a specific contract. In this regard, the bank or credit institution will activate the guarantees specified in the insurance contract in the event of insolvency.
How to choose a secured loan?
The best protected loan provides full insurance coverage, an insurance policy which is called “CPI”. In this case, the bank, in the event of insolvency of one or more installments, is paid by means of the insurance policy. If contemplated in the insurance contract, the entire outstanding debt could be paid off at the request of the creditor. The so-called “accessory” policy is less requested, which provides for different types of insurance reimbursement: the credit institution can allow the debtor not to pay a few installments or more installments. In these cases, if provided for in the insurance contract, automatic debt is not reported as a bad payer. The latter hypothesis does not provide for any extra economic sacrifice.
Example of a secured loan
We admit that a person requests a loan of $ 25,000.00 from his credit institution, with insurance coverage in the event of partial or total insolvency. An internationally renowned company would make the debtor pay around $ 21.00 per month. By virtue of the “Liberalization Decree”, before the customer makes use of his own insurance company, the credit institution must necessarily present two different estimates to the customer, that is, prepared by different insurance companies, which have never had any connection with the the lender. Of course, the insurance premium will vary according to the largest loan obtained.
Should I apply for a secured loan?
Although the secured loan represents an ancillary option for the borrower, it is advisable to join, especially if the requested loan is important. It is also good to keep in mind that it would be better not to take out a protected loan “with recourse”, in order to be forced to repay what the insurance company has paid and / or advanced to the credit institution.