What are the strangest things that people have sold to get them through the financial crisis?
What would you sell to get you through the financial crisis? As I discovered recently, many of you would flog your partner. In fact, some would simply give them away.
But there might be other things you could sell first. And no, I don’t mean your grandmother.
New research shows that Brits are already flogging off unusual assets to help them through the economic downturn. It comes from alternative lender Borro.com, which offers loans against “personal assets” such as luxury watches, jewellery, fine art, antiques and prestige cars.
You may not have many of these things to sell. I certainly don’t (unless my six-year-old used Honda counts as “prestige”). Or you might have something even more unusual.
Like a tank.
From tank to bank
No, really. Some cash-strapped chap recently raised £10,000 with Borro.com against an old army tank that he owned for some explicable reason. Somebody else raised £26,000 against their motorhome.
Another hard-up customer raised £32,500 against his Beatles memorabilia. Others have handed over a Henry Moore sculpture (£50,000), their collection of classic Fender guitars (£23,000), a Persian rug (£8,000), a 1996 Olympics rowing club (£1,000) and an 18th century Swiss violin (£786).
It all sounds fun but of course it isn’t. Presumably these are treasured possessions that people have been forced to part with, to see them through the downturn.
Let’s get physical
If your back is against the wall, it’s an option to consider. Short-term asset lenders don’t carry out any credit checks, because they’re lending against a physical item. That means you can get your cash quickly. If you default on your debt, they recoup their money by selling it off.
The lender will give you between 50% and 75% of what your asset is worth, depending on how easy that asset is to sell on if you don’t reclaim it on.
A motorhome, I would imagine, is pretty easy to flog off. An army tank (one careful owner) may have a more limited market.
Alternative lending
Take a close look at the interest rate you will be paying. Alternative lenders (including pawnbrokers and payday loans) typically quote interest rates on a monthly basis, whereas mainstream mortgages, credit cards and personal loans are quoted on an annual basis. This makes short-term finance look cheaper than it is.
Borro.com charges interest of between 2.99% and 4.99% a month, which works out at an annual rate of 39.1% and 68.8%.
That is still lower than many payday loans, whose monthly interest rates can convert into shocking APRs of 1,700% or more. Although amazingly, one lender offers a tempting 0% payday loan.
Strange days
Borro.com says the average loan lasts five months and around one in 10 of its borrowers default. When this happens, it sells the item to recover the money owed. It then adds an 8% administration fee, and returns any surplus to the customer.
It doesn’t just lend to people with debt problems. Many self-employed people and small business owners who can’t get finance from their bank use their assets to raise cash to pay for a tax bill or invest in their business.
You can borrow anything between £1,000 and £1 million.
Broke? Pawn it
If this sounds familiar, well, it’s not that different to pawnbroking. Back in 1988, I rented a flat above a pawnbrokers in Golders Green, and those three brass balls seemed like a relic from the past.
Not anymore.
The soaring gold price has led to a surge of people taking jewellery and other valuables to their local pawnbroker to turn them into ready cash.
You can either sell your valuable outright, or use it as collateral for a loan. The average loan is around £150, although you can borrow much larger amounts.
A good pawnbroker will let you redeem your goods at any time, and only charge interest for the period you have borrowed the money.
Reputable chain Albemarle & Bond, for example, quotes its interest rates of between 3.99% and 7.99% per month, which works out as an APR of 60% and 152% respectively.
Watch out for companies cashing in on the gold rush by offering rip-off rates. Always visit several pawnbrokers to get an accurate picture of how much your valuables are worth, because rates vary enormously.
Give lending the boot
In an ideal world, you wouldn’t have to borrow money to make ends meet. And if you did, you would borrow it on a 0% credit card and clear the debt before you incurred any interest.
Sadly, few of us can aspire to that perfect state, especially now.
Asset lenders, pawnbrokers and payday loans are far from ideal, but a reputable lender can help you out in a jam. Or if the only alternative is a loan shark or doorstep lender, prevent you from getting into a jam.
You may be surprised to see what you can turn into cash. And don’t forget, there is always your local car boot sale.