Increasing popularity of asset based loans

Growing in popularity due to banks’ tougher lending criteria and lack of willingness to provide, or extend overdraft facilities, are asset based loans. When funds are required quickly to solve a short term cash flow problem, or to pay an unexpected demanding bill, traditionally our own bank would be our only port of call. There some sort of loan facility or an overdraft would be put in place to provide the necessary funds. Tighter lending criteria has made this course of action a more difficult option, with many short term finance requests that would have once been approved now being declined.

Unfortunately the unexpected bills and other circumstances that lead to urgent funds being required are still very much with us. With the banks being less accommodating demand has risen for other forms of finance. In particular asset loans, which are borrowing facilities based on the value of assets, have been quickly growing in popularity.

Asset loans can be arranged very quickly and are basically a modern form of pawn broking. Loans are made ranging from £1,000 up to £1 million based on the term required and the value of the asset that is being used to provide security. Types of assets that can be used to provide security include jewellery, valuable watches, cars, motorbikes, boats, vintage cars, valuable art and antiques.

The amount of money that can be borrowed on an asset loan is based on a percentage of the value of the asset. Interest is charged on the loan and added to the facility, which means there is no necessity to pay monthly payments. The asset loan is for a fixed period of time after which the loan needs to be repaid. Naturally the loan can be repaid before the end of the term, in which case interest will be refunded and the settlement amount recalculated.

Applying for an asset loan is very simple and funds can be arranged very quickly. The most important part of the process is the valuation of the proposed asset which the asset based lender will quickly arrange. Once the valuation has been completed a loan offer is made. Provided the offer is acceptable to the asset loan applicant, funds can be paid directly into their bank account.

The asset or asset being used as security will be safely held by the lender until the loan has been repaid. Insurance is also provided by the lender and all items are well looked after. This includes vintage vehicles and valuable pieces of art which are all stored in the correct conditions depending on the item.

In the event that an asset based loan is not repaid as per the terms of the agreement, the security can be sold in order to repay the debt. Naturally any proceeds remaining following the sale and repayment of the debt will be returned to the loan applicant.