If a loan company signs a contract with no collateral at the time of the signing, can they later ask for collateral?

UPDATED: Aug 18, 2011

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If a loan company signs a contract with no collateral at the time of the signing, can they later ask for collateral?

A loan company that we are going through signed a contract with us and never said anything about collateral. They are requiring collateral after the contract has already already signed and won’t transfer our funds until we give them collateral.

Asked on August 18, 2011 Washington


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

A contract, once signed, binds both parties. Neither party can unilaterally (or on its own) change the terms of the contract. So if a contract was signed for an unsecured (no collateral) loan, it *should* be the case that they have  to provie the loand without getting any collateral. The key issue, however, is exactly what does the contract say? Do they have the right to decide to not lend, or to put additional terms or conditions on the loan, etc. If the contract lets them do this, they can do this...or if they discovered some falsehood, omission, or error, etc., in your application, that would probably give them grounds. You should review the contract again carefully, especially the "small print"; you could also ask the loan company to explain why they think they can ask for collateral and to point out the term(s) in the contract they assert allows this. Good luck.

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