WHY MUST VALUE ASSETS WHEN TAKE BANK LOAN

At present, many people still do not fully understand the effect and meaning of collateral valuation when borrowing from banks, although this is a regulation being implemented in most banks. Collateral valuation is also the first stage for the bank to consider the ability to accept a loan or not, how much to borrow?

What is collateral?

First of all, we must understand what the term "collateral" is? According to Clause 7, Article 3 of Decree 163/2006 / ND-CP of the Government dated December 29, 2006 on security transactions stipulates: “Collateral is the property that the securing party uses to secure perform civil obligations towards the secured party ”. Also according to Article 4 of this Decree, “collateral can be existing assets, assets to be formed in the future and allowed to be traded”.

Existing assets we can easily see and tally. However, in terms of assets to be formed in the future, it is relatively abstract. Therefore, the state has specified in Article 2 of Decree 11/2012 / ND-CP to explain future assets as follows:

Future assets include:

• Assets formed from loan capital;
• Assets are in the forming stage or are being lawfully created at the time of entering into security transactions;
• Assets that have been formed and subject to ownership registration, but only after the time of entering into security transactions can they be registered according to the provisions of law. Future property does not include land use rights. "

The relationship between collateral and bank loans.

When you apply for a mortgage bank loan, depending on the value of the loan and the purpose of the loan, you can use many different types of collateral. The more valuable a collateral is, the more it can be secured for large loans with a high credit limit. Conversely, low collateral, prone to price fluctuations, will often find it difficult to bring back the desired loan of the customer.

Why must appraise collateral prices when borrowing from banks?

Although there are many types of collateral for borrowing purposes, depending on the regulations of each bank, the collateral for the loan will be different and the loan value will also be different. In general, the current lending rate of banks is 70% of the collateral value. The most common collateral today include: real estate papers, valuable papers such as stocks or government bonds, cars, savings books, pink or red books of real estate, life insurance ...

Assets are pledged to banks for the purpose of ensuring the safety of the loans and the ability to recover the loan when it is due. Therefore, such collateral must be priced according to the standards and regulations of the Law on Valuation of Vietnam. From there, determine the exact value so that banks or credit institutions have the basis to accept loans from customers.

Currently, banks often associate with independent and specialized appraisal units to value customers collateralized assets to ensure the most objectivity and accuracy.