Asset-Based Lending versus Pawn Shops

Asset-Based Lending versus Pawn Shops

We take a look at how asset-based lending differs from using a traditional pawn shop.

Asset-based lending involves using a valuable item as collateral, to secure a loan. If you repay the loan plus the agreed interest, the item is returned to you.

So how does this differ from using a traditional pawn shop? Here we consider some of the key differences.

Target market

First, the target market of traditional pawn shops is the desperate. People turn to them as a last resort. They don’t expect to get a fair deal – they simply feel like they have no other options.

Pawn shops are also notorious for buying stolen goods, even if this is often unintentional (or at least difficult to avoid) on their part.

The asset-based loan companies that have emerged in recent years, like lamna, differ in that they primarily target small to medium business owners and entrepreneurs, along with wealthy individuals, who need “bridge” loans to weather temporary cash shortages.

Loan value

When you offer a pawn shop a valuable item, the buyer typically starts by trying to point out what’s wrong with the item. Then you’ll be offered a hugely discounted loan, representing a small fraction of the worth of the item. For example, you might be offered 10% or even less of the item’s actual value.

Typically the loans offered by reputable asset-based lenders are significantly higher. They’re determined based on expert appraisal and reliable data about asset values.

An asset-based lender like lamna is also in a position to handle larger transactions than a pawn shop. For example, it can offer loans on luxury vehicles or valuable artworks.

Respectability and discretion

Pawn shops aren’t known for being in the best of neighbourhoods, and, thanks to their sometimes dubious dealings, there’s a stigma associated with using them to secure cash.

In the case of an online asset-based lender like Lamna, you simply submit details of the item you want to use as collateral in a web form. Experienced appraisers assess the value of the item and you’ll be offered a loan value, repayable with interest.

The process is completely discreet, and there’s no stigma involved. Asset-based lending is viewed simply as unlocking the value of your personal assets to secure a short-term loan. It’s quicker than getting a loan from a bank and doesn’t require that you actually liquidate or sell your possessions to secure funding.

Transparency

Pawn shops may levy different fees, ranging from insurance and “storage” fees, to fees for extending the repayment period on your loan. In the case of asset-based lending, you repay the principal loan plus the agreed interest – there are no other hidden charges.

For more information or to apply for an asset-based short-term loan, contact us now on 086 111 2866.

ILLUSTRATIVE EXAMPLE

Client borrows R10,000 for 90 days.

Loan Amount
Repayment Period
Monthly Interest
Total Cost of Loan
Initiation Fee
Monthly Fee
APR
R10 000
3 months
R500.00
R2 914.50
R1 207.50
R569.00
60%

Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.

APR & Loan Repayment Period

Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.

Non-Payment

Non-payments may result in the matters being escalated.

Renewals

All accounts may be renewed if they are up to date.

Collection

All payments are made via EFT or direct deposits into Lamna’s bank account. There are no debit orders.

Asset-Based Lending versus Pawn Shops

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Asset-Based Lending versus Pawn Shops

Apply Online

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Asset-Based Lending versus Pawn Shops

Apply Online

Asset-Based Lending versus Pawn Shops

Apply Online

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