November 13th, 2012
Review: Borro Lends You Cash for Your Valuables
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Picture this: You’re starting a new business, say a hat shop. You need a small business loan to get the Hat Shack up and running, but each bank you visit has tightened its purse strings. Loans are difficult to come by, and they have high credit score requirements. Where do you go so you can get your shop ready to go before hat season?
Enter Borro, an online pawnbroker that extends secured personal loans backed by valuable assets.
How it Works
Originally launched in the UK, Borro has had a New York City headquarters since January 2012. Its personal asset loans use your high-end valuables as collateral. Basically, if you have a need for a loan and a valuable asset, you could qualify for a Borro loan. Here’s how it works:
- Fill out the online application, in which you describe your valuables and their market value.
- A Borro expert will assess your valuables and appraise them as well as give you a loan quote. This happens either at a valuation center (in Midtown Manhattan, New York), during a home visit arranged by Borro or via secure courier service. Borro insures all asset deliveries and storage.
- You’ll have the opportunity to accept the loan contract; there’s no credit check required.
- Your loan will be financed the same day. In other words, you’ll get your Hat Shack money fast.
- You’ll pay back your loan and the interest accrued at the end of the six-month term. And if you do so early, there’s no penalty.
- Your valuables will be sent back to you, safe and sound.
Borro accepts a variety of assets to secure loans, including luxury watches, jewelry and diamonds, gold, fine art and antiques, luxury cars and fine wine. Typically, borrowers receive 50 to 70 percent of their valuable’s resale value, which averages out to $17,000 per loan. That’s contrasted with the typical pawn shop loan of $150.
Compared with payday loans, another option for the credit-less, Borro loans are much less expensive. Their monthly interest rates fall between 2.49 and 3.99 percent.
What’s the Catch?
Borro isn’t for everyone. For some, shopping for a traditional loan is the better option. These personal asset loans are for those people who need cash fast, say for a business opportunity, but don’t want to sell their valuables in order to get it.
Taking a loan with Borro has some distinct disadvantages:
- It won’t help you build credit like a traditional personal loan.
- If you can’t repay your loan, you’ll lose your valuables. In fact, Borro will sell them, usually at an auction.
- Unless you live in New Jersey, New York or Connecticut, getting a Borro loan could be impractical, since they offer in-home appraisal or a visit to their valuation center in NYC. Borro is hoping to expand to other metropolitan areas on the U.S. to fix this problem.
- Since the average interest rate of 2.49 to 3.99 percent is monthly, Borro loans are more expensive than you may think at first glance, though not as expensive as payday loans.
Bottom Line: Borro is trying to fill in a gap in the lending space—somewhere between a payday loan and a personal loan. But their loans aren’t a good fit for everyone. If you’re in the market for a personal or small business loan, make sure you check out all of your options using Credit Karma’s savings analysis.