Editor If you ever find yourself arrested, you may be permitted to post bail depending on the nature of your case. The bail amount will depend on your case’s severity, the number of charges, your age, and other factors. Without cash at hand, you may need to turn to a bail bond agency to raise the money.
Bail bonds offer a way of reducing the cost of bail. However, you’ll need to put up some form of collateral. Before seeking this option, use this read for understanding bail bond collateral.
1. What Is Collateral?
Before understanding bail bond collateral, you must first know what is collateral. It’s something of value that a borrower can forfeit to a lender, such as a bail bond agency, if they don’t receive the loan money back on time as agreed. If you obtain a mortgage to buy a home, the home itself will serve as collateral. In the case of a car loan, the vehicle becomes collateral.
When a business seeks bank financing, it may use valuable assets like real estate or equipment as collateral for the loan. An unsecured loan has a higher interest rate than one secured by collateral. When a borrower defaults, the lender has the right to sell the collateral to recover the loan.
2. Why Bail Bond Agents Require Collateral
Understanding bail bond collateral also requires knowing why bail bond agents require it. Bail bond collateral is any item of value that a bail bondsman can sell if a defendant’s actions cause the bail to be forfeited. For instance, if the defendant fails to appear for their trial on the scheduled day and the bail bond agency can’t recover the bail amount through the court, they can pursue the debt from the defendant. An example can better explain this.
If bail is set at $50,000 by the court and the defendant is unable to pay the whole amount upfront, they can secure their freedom by paying a bail bonds agency a $5,000 non-refundable fee to get the bail bond money.
Unfortunately, the defendant is known to skip court appearances. In this case, the bail bondsman requests collateral before issuing the bail bond and informs them that if they don’t adhere to the terms set by the court, the assets put up as collateral will be seized. Like with investment property financing, this lowers the risk the bail bonds agency faces.
3. How Bail Bonds Differ From Other Loans
Understanding bail bond collateral can also help you understand how bail bonds differ from other loans. If you’re arrested, you’ll be given a hearing date and a predetermined bail amount. It’s up to you, your family, and your friends to pay for your release while awaiting court dates and arrest. Here, a bail bondsman can step in as a third party.
After the bail bondsman posts bail, it is up to you as the accused to ensure you attend all court appearances. If you skip bail, the bondsman will become a bounty hunter and seek you out to bring you back to court. There’s typically a grace period when they can be returned to court and the money refunded to the bondsman. Within this grace period, the bounty hunter will try their best to track you down and deliver you to court.
If you skip bail and don’t return, the money put up by the bail bondsman will be confiscated by the courts. The agency will then take possession of the collateral serving as security for this bail bond from the friend or family acting on behalf of the offender. This is why you should make an effort to show up to court, and everyone cooperates to ensure the proper legal procedures are followed.
Bail bonds differ from other loans, such as personal loans, in that you can’t use the funds for anything other than posting bail. For example, you can’t use the money to pay for a lawyer. You’ll have to seek other sources of financing for that.
4. Using Real Estate as Collateral for Bail Bonds
If you or someone posting bail on your behalf owns real estate, you can use it as collateral for the bail bond. While it’s a bit more complicated than cash, it’s commonly used. You don’t have to sell your house to post bail, so you won’t have to worry about suffering a loss from its sale.
Before putting it up as collateral, you’ll need to verify you’re the rightful owner of the property. You can submit a mortgage or tax statement to do this, followed by a title search. Next, you’ll need to get the property appraised. This will not only help you determine whether the value of your house is sufficient to pay for the cost of bail but will also reveal to the bail agency any liens against the property.
After that, you can start preparing the documentation. You must sign a deed of trust or mortgage and a promissory note. Although the process may seem complex, it safeguards both the bail agent and the borrower. Your bail agent can help you navigate the steps of understanding bail bond collateral because they have probably done it hundreds of times before.
5. How to Negotiate Bail Bond Collateral
You can negotiate the terms with your bail bond agency when putting up collateral such as commercial real estate. You can get more favorable terms if you have a solid employment history or a good credit score. Some bail agencies may even offer no-collateral bail bonds.
They won’t ask you to pledge your home or vehicle to give you a bail bond contract. These agencies will only demand the bail bond premium before posting bail. Find a bail bonds firm that’s ready to provide a no-collateral bail bond so you don’t have to worry about losing your house or car.
6. Using Vehicles As Collateral
When alternative options aren’t accessible or would take a long time, using the car title for your yamaha vehicle as collateral for bail bonds is a practical way to get you or someone out of jail. However, you must consider several factors before using your car title as bail bond collateral. Still, it may be your only option for getting you or a loved one out of jail on weekends and major holidays since banks are usually closed.
Car titles are typically used as temporary collateral and swapped with another source when the holiday or weekend ends. Although high-end and vintage vehicles are favored as collateral for bail bonds, any car that satisfies the set requirements may be eligible. Some of these include; you must be the rightful owner of the vehicle, it must be insured and registered, you must hold a physical copy of the pink slip (copy of the title), the engine must be in optimal working order, and the body in good shape, and the car’s book value must be close to the sum demanded the bail bond loan.
Bail bonds are not limited to passenger automobiles. They can also be secured with other forms of property, such as trucks, motorbikes, vans, boats, jewelry, firearms, musical instruments, artwork, antiques, or anything else you possess with a market worth comparable to the loan being requested. Consult a bail bond agent to help you in your quest of understanding bail bond collateral and if your vehicle can qualify.
7. How Collateral Value Is Established
Before a lender can give you a loan, they must evaluate the asset’s value. The term ‘collateral value’ refers to the asset’s fair market value. You can establish the collateral by looking up the prices at which comparable assets have recently sold or by having the item appraised by a professional.
A good example of this is a home appraisal. They’re performed by licensed specialists who inspect the property and ascertain its value. They consider factors such as the home’s quality, condition, and square footage. They’ll also look for potential issues that can lower the home’s fair market value.
The appraiser also considers current market trends and compares the house with comparable homes recently sold in the neighborhood. If the appraisal reveals a lower value than the sales price, your lender will only loan you the equivalent of the home’s appraised value. You may need to try to negotiate the home’s price or put down a larger cash deposit.
For other assets, such as an outboard motor, you can establish the value by consulting outboard dealers. In the case of a car, one can go to the car dealer who sold it. Knowing how collateral value is established is key to understanding bail bond collateral.
8. Using Multiple Small Assets as Collateral
In your efforts of understanding bail bond collateral, you’ll soon learn you can use multiple small assets as collateral. For example, if you own a collection of precious metals that have a significant financial value and are highly liquid, your bail bond agent may accept them as collateral. However, before accepting them, they’ll assess their current market value by looking at, for example, the highest prices paid for gold and diamonds.
The metals can either be in the form of ornaments or not. If you have a good store of value, you can use diamonds, emeralds, rubies, and sapphires. If they feature innovative or unique designs, they can also add to the collateral’s value.
Note that bail bondsmen are typically not jewelry experts. You’ll be better off taking them to a pawn shop, pawning them, and then giving your bail bonds agency the proceeds. Some people hesitate to put up jewelry as collateral as the bondsmen must keep them secure while in their possession.
Credit cards may sometimes be used as collateral. First, using your credit card’s maximum limit may provide the cash you need to secure bail. Second, certain bail bond agents may accept your credit card in exchange for a series of preauthorized payments.
9. Selling Vehicles to Get Cash for Collateral
Of all the collateral types, cash is considered the most secure. Typically, the client will send money to the bail bond provider by wire transfer. Alternatively, the client can give the bail bond agent a cashier’s check. The most notable benefit of using cash is it’s easier to understand by all parties involved.
So instead of putting up your car as collateral, you can sell it and use the proceeds as collateral. You can approach selling your car in such an emergency in different ways. If you have an RV, an RV dealership can buy your used automobile under the right conditions.
Take it to a few local ones and request an appraisal from the used car managers. Prioritize dealerships specializing in your brand, such as Chevy or Ford. If they’re interested in what you have, they’ll immediately pay you and take care of the paperwork.
However, there are some negatives. For example, you may not get the best price by going this route, and the dealers probably won’t be open for negotiation. In fact, it’ll likely get you the lowest price for your used automobile of all options.
If your car is in bad shape or too common, they may not even want it. You’ll need to thoroughly clean your automobile before the inspection. Note that the dealer will oversee the entire process.
You can also sell your used car to a friend who’s expressed interest in buying it for a while. Although not guaranteed, the deal should get you close to its market value. In this case, you won’t need to do any advertising as your friend will likely already be familiar with your car. You might not even need to clean it up much, but out of respect for your buddy, you should have a mechanic check it out.
10. The Risks of Using Collateral for a Bail Bond
Understanding bail bond collateral will also help you understand the potential risks. Before agreeing to post bail for a family member or friend who’s been detained, ensure you know what you’re putting on the line. Most bail bondsmen allow or even require clients to use their home’s equity as collateral for a bail bond.
This means they’ll place a lien on the property until the case is concluded. If the person fails to show up to court after being bailed out, that will leave you in a tricky situation. Before cosigning a bail bond, take some time to think about it and consider consulting a wealth management advisor.
When you’re arrested, and the court sets a bail amount, you may find it’s too high to pay out-of-pocket. Luckily, you can turn to a bail bonds agency for help posting bail. However, before you do so, set aside some time for understanding bail bond collateral.
