It’s hard to believe that the phrases ‘credit crunch’, ‘economic downturn’ and ‘recession’ were once barely used – back in the late 1990s and early 2000s, Britain was enjoying a period of relative calm and prosperity.
However, everyone knows the story of how the bubble burst, taking with it a number of the things we took for granted. One of those things was the ability to get credit quickly and easily. People who needed a loan, perhaps to set up a small cottage industry or buy a big-ticket item, discovered this was much more difficult or even impossible, particularly if they didn’t have a completely unblemished credit history.
Banks became reluctant to lend to all but their star clients – but people also began to trusts the banks less because of their part in the credit crunch, creating a vicious circle.
For business projects in particular, people who couldn’t prove their track record and provide a full financial forecast were not likely to be able to get finance.
What about credit cards?
Credit cards were once a hugely popular method of accessing money quickly, but the economic downturn brought with it a wariness of plastic. A multitude of cards makes it difficult for people to keep track of their spending, it can be tempting to pay back only the minimum amount each month (resulting in potentially significant debts), there can be a risk of identity theft and some companies put fine print in their contracts that can lead to nasty surprises at bill time.
With bank loans less likely and credit cards seeming less appealing, it’s no wonder that people were looking for more creative ways of accessing finance.
The rise and rise of asset loans
Asset loans started to become popular when people realised you don’t have to conform to typical lending standards to get them. For example, even if you have a blemish on your credit record or are starting a small business that does not have a proven record yet, you can still get finance secured against something you own because there are no credit checks against you.
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This is because if you are putting something like designer watches or diamond rings down as security, you demonstrate to the pawn shop that you believe in your ability to pay that money back and they therefore see less risk.
It is also usually possible to borrow larger amounts over a longer period with a secured loan, meaning they can be used for everything from essential purchases to large-scale home improvements without saddling you with crippling monthly repayments.
What can be used to secure asset loans and how does it work?
The key to getting effective asset loans is to use high-value items such as designer watches, jewellery and even cars, as these will release the most money to you. Most people have more assets than they realise, so sitting down and thinking about items that could be used as security is well worth doing. You could be sitting on the proverbial gold mine without even realising it, particularly if you like to collect nice possessions such as fine art.
Once you have done this, it’s just a case of making applications to loan providers, comparing their valuations and choosing the best one. The lender will then arrange to have your item collected and you will get your money the same day.
You simply start repaying the loan as agreed and when the full amount has been received, the item will be returned to you.
Is it safe?
Taking out asset-based loans is safe, provided you use accredited and professional organisations such as Borro and follow some easy guidelines.
Keep thorough documentation so you know the terms and conditions and are aware of how long you have to repay the loan. Ensure you will be able to cover the repayments including the interest, and ensure you do not choose a company that charges for early repayment.
Doing this will ensure you benefit from your asset loan and achieve the financial freedom you need, without a bank or credit card in sight.