Should you sell, pawn or borrow against your assets?

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Avid collectors of records, stamps or train sets who are short of cash could put their prized collections to good use. Don't worry, you don't necessarily have to sell them to raise money.

With many cash-strapped Brits and small businesses struggling to borrow from banks, some are turning to unusual assets to raise money. Pawnbrokers have seen customers come through the door with things like Fender guitars, designer handbags or rare books.
Think twice before selling your prized possessions. Pawning them – borrowing against the assets – means you can raise some cash, albeit at a cost, whilst holding on to your heirlooms. Shop around before you decide on a pawnbroker or other alternative lender - make sure you don't end up paying exorbitant interest rates.

If you never wear your jewellery or barely ever look at your stamp collection, you might as well part with it temporarily and borrow some money against it. So have a look around your home for anything of value that you don't mind putting in storage for a while in return for a loan.

Pawnbrokers have been doing a roaring trade during the recession and are expanding beyond their traditional boundaries of gold and jewellery pawns. Recent examples include designer handbags, classic cars and even areroplanes. The National Pawnbrokers Association (NPA) says business increased by 15% last year and is still growing in double digits. The average size of the loan has also gone up as more people on middle incomes and small businesses turn to pawnbrokers for cash.

In a speech on Friday, NPA chief executive Ray Perry will state that banks continue to lose their customers to the pawnbroking industry: "The continued failure of banks to lend has resulted in pawnbrokers increasingly becoming the high-street lender of choice for businesses and the middle-classes. The professional standards of NPA members, flexibility of loans and high customer satisfaction levels provide people from all walks of life with a clear alternative."

James Constantinou opened Prestige Pawnbrokers in Weybridge in Surrey just as the recession started. He pawns anything of value - fine wines, jewellery, art, rare books and antiques.

"More and more people are coming through the door, they have been to the banks, and have been turned down for an overdraft or loan," he told the BBC. "So, they are looking round their homes, and they are finding out they have actually got items they can use as collateral."

Financial experts say pawnbrokers tend to be a cheaper way of raising money than payday loans. And the big advantage over getting a bank loan is that you don't have to go through credit checks. It's much quicker and simpler. But remember, if you can't pay back your loan you risk losing the item - although most pawnbrokers will try to extend the term of the loan.

An online pawnbroker like borro offers loans of £1,000 to £1,000,000 against luxury watches, jewellery, fine art, antiques, prestige cars and more. That equates to up to 70% of the value of assets put into storage. For example, a train collector managed to secure a £41,000 loan against one of their train sets.

Another used their stamp collection to borrow £81,000. borro has also lent £23,000 against a collection of Fender classic guitars and £32,500 against Beatles memorabilia. A Mackintosh panel from the Willow Tea Rooms in Glasgow secured a loan of £10,000.

Another alternative lender is @Pledge, which lends against assets like boats, aircraft, classic cars and antiques. They had a private coin collection in last week worth about £200,000.

A selection of unusual assets in the borro vaults:
Item Loan
Stamp collection £81,000
Train set £41,000
Beatles Memorabilia £32,500
Collection of boxing memorabilia £25,000
Collection of Fender classic guitars £23,000
Mackintosh Panel from Willows Tea Rooms £10,000
A pair of German parcel-gilt silver figures in medieval costume £5,000
Swiss Violin circa mid-18th Century, with bow, cased £786
17th and 18th Century Manuscripts £400
18th century Dictionary £145

Paul Aitken, who heads up borro, says: "Brits are realising that they have some very interesting and valuable personal assets sitting in their homes or in storage which could be put to some good use – especially when it comes to raising finance.

"Individuals and small businesses are still looking at alternative ways of raising money to help pay for unexpected financial situations – tax bills, or business cash flow issues for example. Unlocking the value of unique and unusual assets could be the solution."
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