“Well, a Bail Bond is sort of like a loan…. Right?”
No. A bail bond is no more a loan than a bicycle is an airplane. Both are forms of transportation. But neither closely resemble one another. A bail bond contract consists of a surety company assuming liability which may not be affordable or desirable to the individual charged (referred to as the principal or defendant). It is in no way, a loan which occurs when a lender loans money to a borrower under terms of repayment. The lender profits from the interest charged on the principle balance which is often secured by collateral.
Like a loan, a bail bond typically consists of parties to the contract, co-signers, collateral and sometimes interest on the premium paid. Yet it is vastly different from a conventional or unconventional loan. For instance, there is no money actually being borrowed. The surety company is only liable to the court. Aside from the possibility of some processing fees, there is no money being paid on the principal’s behalf to any entity whatsoever unless the bond is forfeited to the court.
Instead of viewing a bail bond as a loan, we must understand it to be a matter of liability. Much like your home, vehicle and / or life insurance policies, a bail bond assumes the liability of a dollar amount guaranteeing the principal will appear in court. If they do not appear, the surety agent, by virtue of civil contract retains the right to return the defendant to the custody of the sheriff of the jurisdictional county. If he or she is unable to do so, the court can order the bond amount be forfeited or they can order the surety agent to pay the extradition costs of transporting and housing the defendant if he or she is incarcerated in another state or county.
For assuming that risk, surety agents often charge a 10% premium of the full amount of the bond. Now, here’s where it gets tricky. Bail Bondsmen, especially as the market has become more and more competitive, have begun to finance much more than in past years. With financing, some surety companies charge interest on the amount financed. This is where someone may get the impression that they are paying a sort of loan. However, it is no different from any insurance premium. Generally, if you pay your insurance premium annually, you get a better rate than if you pay it month to month.
Nicholas Bail Bonds does not charge interest on our financing. We never have, simply because I don’t necessarily think it is fair to charge interest on something I am not loaning. If I choose to finance someone, that is my choice and I feel, not charging interest is an incentive to use my services if needed. I would rather them come back to me if they need me rather than feel like I somehow “got over on them”. Many times, a client that trusts you is a client that you can actually help set on a better path in life.
So, if you are a bail agent reading this, the next time someone asks you to explain what you do for a living, stay away from the word, “loan”. We have enough with which to contend. The last thing we need is to be thrown in with a pool of loan sharks… especially when that isn’t even what we do.
You are a professional who manages risk and provides assurance of appearance of defendants in criminal court. We are the good guys! We make sure the people charged with offenses, appear and when they don’t, we make sure the taxpayer doesn’t foot the bill!.