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This is a letter of deposit also Known as an Informal Charge executed between the Borrower of a loan, the Chargor who is the third-party guarantor and the Lender. It is done in favour of the Lender and acts as security for a sum/credit/loan advanced to the Borrower. It defines the terms under which such loan has been granted and provides mechanisms of debt collection and or remedies to the Lender upon default of the Borrower.
A letter of deposit being an informal charge is only noted in the registry. It is noted as encumbrance only when a search is done over the Property. As an informal charge, a caution should also be prepared and registered. Other accompanying documents such as the original title, copies of IDs and PINs of the borrower should also be surrendered to the Lender.
Further, and on top of this, the Lender should ask the borrower to execute an undated transfer at the point of executing this letter of deposit. This is also beneficial to the Lender in that, if the borrower defaults, the Lender may proceed to transfer the secured property to themselves.