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Mohammed Hingora (Director)     16 September 2013

How to secure collateral


I am in the process of giving a loan to a business associate. However, as I was not convinced completely on their ability to pay back, I have asked for a collateral in excess of the loan amount. The associate has a property worth significantly more than the loan amount which they are willing to put up as security. However, since I am not an NBFC or a bank, what sort of documentation can I use to secure myself in the event of Non performance by my associate. 

Will taking an irrevocable power of attorney for the property, in my name suffice? Should I get the property transferred to my name? I would prefer a solution where I do not have to transfer ownership of the property into my name as it will incur various charges such as Service Tax and stamp duty.



 3 Replies

Advocate Sastry (Advocate)     16 September 2013

I suggest you contact a local Advocate for proper guidance....

Prasun Chandra Das (Banker)     17 September 2013

For an individual, taking property as security is complex, and enforcing the security (God forbid if the time comes) entails lengthy litigation in courts. My suggestion would be to take some security which can be easily liquidated.


As Adv Satry has suggested, you should take help of a local & competent advocate, for advice and for drafting the loan agreement and security documents,


Lastly, if you are not convinced about the borrower's ability to pay back, why give a loan at all? ;)

NRI Legal Consulting (Consultant)     18 September 2013

for a local advocate query us

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