Life Insurance and Collateral Assignment
Need a Loan but Don’t Have Any Collateral? Consider Collateral Assignment of the Proceeds From Your Life Insurance Policy
Sometimes, you need a loan but just don’t have the collateral or the unblemished credit rating that will allow you to secure your loan via the typical routes. If you’re currently in this situation, you may be able to use the proceeds from your life insurance policy as your collateral. Here’s how it works:
Depending on the company with which you purchased or are going to purchase your policy, you may or may not be able to use the collateral assignment of policy proceeds. This is a relatively new process to come to the insurance industry and not every provider has jumped on board. If your provider will allow you to use your proceeds toward securing a loan, however, you will have to research and follow their specific requirements for doing so, to the letter.
One of the easiest routes to take is to contact a company that will act as the middle man between your life insurance company and the lender or bank from which you would like to receive a loan. Because the people who work in these companies know the process inside and out, you will have greater assurance that all steps are being followed and followed properly and that you will have the best chance of getting your loan. You may not be familiar with the legal wording of various documents, all of which need to be perfect to ensure your application isn’t delayed or rejected.
The first thing these companies will do is contact the lender to see which types of insurance policies they will accept as collateral. Then, if you do not already have a life insurance policy that makes you eligible for collateral assignment, you can go about purchasing your policy.
The company working on your behalf will have already contacted the lender so that your application can be verified and approved before the final submission. Once everything is processed and approved, the last step before receiving your loan is that both your insurance provider and the lender will sign all documents.
As you can see, seeking the help of a company that specializes in the collateral assignment process will greatly simplify the application and improve your chances of receiving a loan through these channels.