What is Asset Conversion?
To put it simply, it is selling some of your personal assets, such as furniture, vehicles and financial accounts, or obtaining things such as a reverse mortgage. Personal assets can also be used as collateral to secure a loan. Discuss your situation with someone knowledgeable about financial strategies and tax planning, such as a financial planner or accountant
Before deciding to sell personal assets for extra income, talk with family and close friends. There may be other options to help you obtain more money, such as a personal loan. Also, there may be financial assistance through a variety of government or nonprofit programs. For example, some programs help people obtain health care services and/or prescription medications at reduced rates or no cost.
Using Personal Assets as Collateral to Secure a Loan
When personal assets are used as collateral for a loan, you offer a lender something of value to guarantee that you will repay. If you do not pay the loan back within a certain amount of time, the lender can keep the collateral or sell it to someone else to pay off your debt. Of course, if you do repay the loan, you get to keep the item.
Collateral loan lenders include:
Banks; Commercial lenders; Auction houses; Pawn brokers or collateral loan brokers. Loans by these businesses are governed by federal and/or state laws, as well as by a variety of business guidelines. Carefully compare the fees, interest and other charges from these different types of lenders.
Personal assets to use as collateral:
Term bank accounts (certificates of deposit). The most common type of term bank account is the certificate of deposit (CD). In these accounts, you earn a higher rater of interest by leaving money in the bank for months or years. Rather than taking money out of the account and losing the interest, it may be a better option to borrow money against the term bank account, using the account as collateral. Talk to a professional at the bank or other financial institution to find out more.
Stocks and bonds. Borrowing against stocks and bonds from financial institutions (such as your bank) may be another option available to you.
An accountant, stockbroker or financial planner can provide professional assistance to help you determine whether this kind of action would be right for you.
Antiques, art, jewelry or other valuables; Furniture. or Vehicles.
Other things to think about:
Consider what you want to sell and why. Identify the current market for these items and how much you should be able to get. Think of a variety of sales methods.
- Which method would get you the most money?
- How quickly will you need the cash?
- Are you willing and able to take the time and effort to sell the items?
- Will it be emotionally difficult to part with the item or negotiate a fair price?
- Should you sell objects as a set or individually?
Reverse mortgages are available to those 62 years and older and present an option to receive an additional line of credit for late-life expenses.
While each mortgage has different terms and rates, reverse mortgages allow homeowners to draw the principal of the mortgage in a lump sum over a set period of time. Homeowners keep the property in their name, and the loan comes due only when the borrower dies, leaves the house for more than 12 consecutive months, or sells the property.
Those interested in taking out a reverse mortgage should contact their lender and schedule a meeting.
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