Understanding Promissory Notes and Secured Lending

Promissory Note Discounting Process

The sequence of discounting promissory notes is similar to discounting one's own promissory notes until the moment of cancellation. The signer is responsible for paying the promissory note.

Loan Application and Approval Steps

• The customer requests a loan for paying off third parties and submits a detailed application of the notes.
• The bank examines the customer's background, which is contained in their file and home folder.
• The bank authorizes credit, calculates deductions, and credits the resulting amount to the customer's account.
• The customer uses the loan for their activity.
• The bank notifies the signatories of the payment location for the document.
• The bank collects the notes from the signatories, who then discover the promissory notes are canceled.
• Otherwise, the bank debits the amount of the promissory note from the customer's account. The bank delivers the canceled promissory note to the customer, who then makes the required payment to the signer.

Understanding Secured Credit

Secured credit is a type of loan where the creditor's right is secured by a debtor's property. This means that if the debtor fails to pay their debt, the creditor is entitled to collect their receivables through the auction of the guaranteed property. Secured credit can involve a pledge or a mortgage.

• A pledge uses movable property as collateral.
• A mortgage uses real estate as collateral.

Types of Pledges

Common Pledge (With Displacement)

A common pledge (with displacement) involves the applicant delivering movable property to the creditor as collateral for a loan, without transferring ownership. The creditor holds and cares for the asset until payment. Once the debt is recovered, the asset is returned to the debtor.

Pledge of Valuables

Individuals who cannot access traditional bank loans but need money can obtain it through the temporary delivery of valuables such as paintings, jewelry, or furs.

Title Deed as Guarantee

A title deed can be used as a guarantee in a rental contract. The tenant delivers the title to the property owner.

Merchandise Collateral

Merchandise collateral (Caución de Mercancías) is when companies require a loan and deliver goods as a guarantee. Upon loan maturity, the debt is forgiven, and the creditor returns the merchandise.

Non-Possessory Pledge

The common pledge does not cover situations where the debtor delivers goods they use in their work as a guarantee. This leads to the concept of a non-possessory pledge.

Characteristics of Non-Possessory Pledges

• The goods are retained by the debtor.
• The debtor and creditor sign a security agreement.
• This contract is often accompanied by the signing of promissory pledges.

Pledge Registration

In pledge registration, the movable asset (without displacement) is kept by the debtor. To guarantee the security agreement, it is registered in a special register.

Buying on Credit and Pledge Registration

Buying on credit is the most common case for pledge registration. Here, the buyer obtains the item under a road pledge agreement. The agent communicates the security agreement, signed by the debtor, which is then recorded in the register of chattel mortgages (créditos prendarios). When the buyer cancels their debt, the cancellation is recorded in their file.