When you apply for a loan, the bank may require a proof-of-collateral letter to verify the property you are pledging as security. Your application will not be approved until you have proven that you have adequate collateral for the amount of the requested loan. If you do not make your loan payments on time, the lender has the right to seize your collateral to recover some of the lost value.
A proof-of-collateral letter should contain the date and lender's contact information. If you have been assigned a loan application number, include a reference line with this identifier. Describe the collateral you will be using to secure the loan in as much detail as possible. The proof-of-collateral letter acts as a cover letter for the information that contains the actual proof of your holdings.
You must also include documentation supporting your claims of collateral. The documentation you choose must be verifiable, such as bank statements or title deeds. For jewelry, antiques, art and other types of physical property, obtain certification from an independent appraiser.
- Photo Credit Purestock/Purestock/Getty Images
Surety Bond Vs. Letter of Credit
Surety bonds and letters of credit are similar in that both involve third parties acting as a guarantor for transactions. Letters of...
What Is a Stand-by Letter of Credit?
According to the site Credit Management World, a stand-by letter of credit is a written obligation from a bank to pay a...
How to Use a Letter of Credit As Collateral
There are two types of letters of credit: the commercial letter of credit and the standby letter of credit. The commercial letter...
How to Write a Letter Requesting Withdrawing a Loan
Requesting the withdrawal of funds for a loan is a matter that must be approached with care, whether you are appealing to...
How to Write a Letter Requesting a Title From a Lien Holder
In most states, a lienholder is given possession of the title until the lien is completely satisfied. The only way for the...
How to Write a Proof of Disability Income Letter
Proof of income letters are normally requested when some type of financial contract is being negotiated. A few examples of common situations...