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How To Get A Loan Borrowing Against Your Luxury Watch

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Omega SpeedmasterIf you are asset rich and cash poor, an interesting and uncommon option to getting quick cash is taking a loan against one or more of your luxury goods. Traditional loans typically have you put up assets such as homes, cars, or just your credit. An international lender known as Borro specializes in borrowers who put up luxury assets as collateral and doesn’t even do loans against homes. Luxury assets are often timepieces in the company’s experience, although Borro also works with other assets such as jewelry, art, wine and cars. What is most impressive is that Borro’s terms are pretty reasonable, given the unique nature of what they do.

Curious about the business, I spoke to Borro’s US General Manager Tom McDermott about who the company typically loans to and how it works. My first question was really “how is Borro different than a pawn shop?” In essence, they are similar, but Borro works on a larger scale with mostly higher-value goods. If you need quick cash for a low-worth asset, then going to a local pawn shop might be a good idea. However, if you want to borrow against a serious high-end luxury watch and want the most money for it, you need to work with a lender like Borro.

What I found interesting is that according to Borro, 50% or more of their clients are business owners or entrepreneurs. This helps explain the relatively fair loan terms, which are in most instances rather short-term, with an average length of 6 months. McDermott said that borrowers typically get 70-75% of the appraised value of their watch, with an interest rate of about 2.5% – 4% calculated monthly with no early payment penalties. That isn’t too bad, and clients go to Borro because most banks will not deal in specialized goods such as luxury watches as collateral for loans.

Borro clients tend to get cash wired to them in a few days, and the loan process seems speedy enough. Borro has offices in Los Angeles, New York, and London. Clients can either visit an office for faster service or work with them remotely and get a quick estimate on what their watches are worth for a loan. Clients then send the watches to Borro who promise a same-day value estimate for their clients.

Borro has a team of internal “valuation experts,” but also works with about 300 external appraisal experts in various fields who are dealers and auction house employees. Of course, Borro also works with these same contacts to help liquidate assets if clients default on loans. McDermott claims that 10% or less of borrowers default, which seems to be a little bit better than average for those who take loans out against such assets of this type. Perhaps the biggest drawback for borrowers is that Borro as the lender holds on to their assets during the period of the loan – which, of course, is pretty standard as well.

Luxury watches are becoming more and more interesting to a wider scope of buyers around the world, so it is logical that the pre-owned, auction, and even lending market as related to luxury watches is expanding as well. I like to cover these financial and retail industries as they apply to the interesting life-cycle high-end timepieces experience after their initial purchase when they are new. Loaning against luxury watches is just one of the many interesting things that watch owners can do after they have purchased them.

Most people don’t like to be in situations where they need to borrow money, and when they do, they are often in a situation where they have little choice. Borro claims that a large percentage of their clients need quick cash for their businesses when cash flow is poor, and that because they are dealing with mostly sophisticated and dependable clients, they can offer a high quality of service. According to their General Manager, about 65% of borrowers end up being repeat customers – and there are few lenders out there with a scale like Borro that will work with these types of assets.

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