How to Write a Proof-of-Collateral Letter

A proof-of-collateral letter is often part of the loan application process.
A proof-of-collateral letter is often part of the loan application process. (Image: Purestock/Purestock/Getty Images)

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.

Basic Information

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.

Supporting Documents

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.

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