There is a world of a difference between the pawn broking shops one sees on the high street with used camera's and phones in their windows and high end asset based lending and finance. Luxury assets such as jewellery, luggage, gold and watches are the most popular items to borrow against in asset lending.
Asset lenders will also consider a wider range of more unique assets such as fine wine, art and antiques, prestige cars etc. Typically, the loan to value (LTV) is between 60%-70% of the value of the item.
Asset based finance is exactly what it says on the tin. It is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a mortgage is a good example of an asset-based loan.
Advantages of short-term asset based loans include the ability to get a fast and easy loan solution, (often in less than 24 hours) for a period of 7 months.
There is usually far less paperwork required as you often only need proof of ID and in some cases proof of purchase or the items provenance, to verify the asset’s authenticity.
Asset lenders don’t run any credit checks as they lend money against your assets so there is no requirement to check any credit rating and therefore there is no impact on your credit history or credit file.
You also retain your ownership of your assets whilst under loan so it is a great way of releasing the value of your assets without selling them. If you can’t repay the full loan amount, your asset will be sold by the lender to recover any potential losses and your credit history won’t be affected.
It offers early repayment options, as you can usually reclaim items early if you pay back the full loan amount and interest up to that day. This is quite handy if you need short term finance whilst awaiting a deal or sale to complete, need instant cash-flow to complete a business deal or to launch an new business or simply if you are awaiting funds or monies due to you and need some personal funds immediately.
You can request an extension for another six months by repaying the accrued interests and fees.
If you decide that you no longer really want the asset, then it can be sold to cover what is outstanding and. if there is any surplus from the sale proceeds after paying fees and charges, any balance is paid back to you.
In summary then it is flexible, fast, discreet and without impact on your credit rating.
Choose a reputable local company and if you can meet them in person all the better, as they may be able to tailor and personalise lending to your specific requirements.
Check that they are signed up to the Financial Conduct Authority and regulated by them.
Discuss the interest rates, which are normally between 4% and 7% per calendar month, depending on the asset and the amount being borrowed. Overall interest is generally calculated in simple terms up to the 7-month term so all very transparent and competitive whilst being underpinned by the FCA and Consumer Credit legislation.
In essence, asset based lending is an old industry with it’s roots in pawnbroking and is also very much a 21st century method of leveraging assets when needed and utilising possessions.
Copyright: Gap Capital Ltd 2019.
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