Loan Articles

Secured loans refer to larger amounts of borrowed money that are secured by collateral. Secured loans are preferred by creditors because they give greater security than unsecured ones. Lenders have guarantees that if borrowers default on their loan, their property may be used to recover the borrowed amount of money. For this reason, lenders offer more flexible terms while granting them. Car loans are one example of secure loan whereby the vehicle acts as collateral. With mortgages, one’s home is the tangible asset that serves as collateral. Borrowers can only pledge a property or car of their own. When banks extend secured loans, they undertake credit check to make sure that the borrower is pledging a property of his possession. The five largest banks in Canada (Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto Dominion Bank, Royal Bank of Canada, and Bank of Nova Scotia) have different lending policies with regard to secured loans and lines of credit.

In Royal Bank of Canada, secured loans come with one of the lowest interest rates compared to other types of credit. The loan is borrowed either against the equity of one’s home or by pledging some form of investment. This may be cash, stocks, government bonds, or guaranteed investment certificates. Toronto Dominion Bank also grants secured loans under more favorable conditions. However, upon extending a loan, the bank assesses the value of the offered collateral. The value of certain assets tends to fluctuate while other assets loose value with time. For this reason, some forms of collateral are given preference over others.
Toronto Dominion Bank places greater weight on guaranteed investments and real estates in comparison to other forms of collateral such as vehicles, equity investments, machinery and equipment. However, the bank also takes into consideration the client’s relationship with the bank. Borrowing history is assessed as part of the credit granting process.

Canadian Imperial Bank of Commerce offers secured loans to companies that have been in business for a period of more than two years. The so called Small Business Home Power Credit is offered to business clients with borrowing needs of at least $50,000 who can use a residential property on the territory of Canada as collateral. Canadian Imperial Bank of Commerce offers competitive interest rates and flexible repayment structure for clients who have more than twenty percent equity in their residential property, can prove upcoming expenses related to the operation of their business, and look for ways to save on borrowing. Finally, the product comes with a variable rate of interest which is determined by the prime rate of Canadian Imperial Bank of Commerce. It fluctuates with changes of the prime rate.

Bank of Nova Scotia offers asset secured loans that are available to both, institutions and individuals. The minimum amount that can be borrowed in the form of an asset secured loan is $500,000. The loan availability depends on the asset that is offered as collateral. Furthermore, the tenure of the loan is determined by factors such as reasons for borrowing, amount of the loan, and type of security. The interest rate varies depending on the loan approval date and the prevailing rates on the market. Bank of Montreal also offers asset based lending to middle size companies. The amount granted in the form of commercial lines of credit varies between $25,000 and $250,000. Commercial lines of credit are available to Canadian nationals who have run profitable business enterprises for a period of at least 2 years. They have to prove the profitability of their business by showing realistic income statements. Holding companies, non-profit organizations, real estate developers and operators, as well as non-residents are non eligible for the commercial lines of credit program of Bank of Montreal.