What is it in advance?

The advance rate is the percentage of the value of the asset that the creditor will use to determine the amount of the loan or credit line for the debtor. The creditor usually assesses the overall financial situation of the debtor with regard to the ability to repay the loan according to standard conditions. After confirming the current market value of the asset offered as a collateral, the creditor shall then notify the debtor of his / her current in advance and the maximum amount that can be borrowed. This approach helps minimize the risk that the creditor has accepted because the collateral is likely to be sufficient to obtain a debt in case of failure.

While advance rates are strongly based on the value of the asset that the debtor wants to promise, creditors also consider further relevant financial information. This includes identification of the applicant's current credit rating, the level of income and the ratio of this income to other debt obligations may exist. If the creditor finds that the applicant is credible and has the ability to consistently make monthly payments from the loan, the process is shifting toassessment of asset value offered as collateral.

Once the value of the collateral is determined, the creditor sets the percentage of this value as the highest amount that the creditor is willing to expand within the loan or credit line. For example, if the creditor finds that the debtor's rate is 80%in advance and the promised asset has a current market value of $ 1,000,000 (USD), the maximum amount the creditor approves is $ 800,000.

The preliminary rate application is in the best interest of both parties. For creditors, this process helps to increase the chances of gaining a return on its investment in the debtor, although the loan eventually led the default settings. At the same time, the debtor has advantages for receiving more competitive interest rates than unsecured loans, and it is at less risk of excessive expanding his finances, provided the debtor was preliminary when calculating the rateE. Using the preliminary rate as the basis of rental activities, the potential for both parties to receive what they want from a business relationship is significantly increasing.