How Money Lenders Assess Luxury Asset Loan Applications

It was a lot of years ago when we assessed Unbolted's lending processes, and then lost contact with them for a long time.

In summer 2023, however, we've received substantial supporting evidence and answers to go along with a relatively short interview on lending processes with the key person on the lending team.

As a result of that, and further data submissions, we were able to publish a new review of Unbolted today and re-list this provider in the P2P lending comparison tables.

While I'd like 4thWay to conduct more ongoing assessments of Unbolted and their processes in the near future, with further interviews, here are some of the key details about how they go about assessing loan applications.

I'm sharing this not so much to tell you about Unbolted itself, which you can read about in the review. Instead, this is to give you an idea of some of the key aspects to look out for when you're looking to lend through websites that do pawn loans on luxury assets.

Assessing gold loans

Gold is easy to value, since it’s about weighing and assessing, using published, real-time prices for gold. Unbolted uses the latest technology – x-ray fluorescence – to discover purity and the exact carat.

It also hedges the gold valuation, which means it buys something similar to insurance to cover any sudden plummet in gold price, in the event it can’t sell items for enough to cover the loan.

For all these reasons, Unbolted is able to safely approve loan amounts of 80% of the gold price.

Assessing luxury watches

When assessing the value of watches, the key person on Unbolted's lending team uses his huge experience in this space alongside comparables. For higher-value watches, watchmakers will take them apart to study them. Unbolted looks at the gold component and does a lost-and-stolen check.

The maximum borrowers can borrow is 70%, to cover downside risks.

Art – you have to keep it simple

For valuing art, Unbolted still uses auction houses.

As each work of art is unique, valuing them accurately contains more risk. That's why the maximum borrowers are allowed to take out is 50% of the valuation.

Using the quick-trade price or the low-auction estimate

Where 4thWay has seen P2P lending providers of these kinds of loans go seriously gone wrong before – with terrible consequences for lenders – is when they haven't been cautious on valuations. At least, that was one of the biggest mistakes they made.

Unbolted – and/or external specialists, where necessary – assess the value of assets at the quick-trade price or at the low-auction estimate.

This is super important, because interest on a loan accrues very quickly at borrower rates of around 40% per year. A loan for 60% of the item's valuation could have the borrower owing 75% of the value by the end of the initial loan period of six-months.

It goes without saying…

In pawn lending, it's standard to actually take the items from the borrowers, securing them safely either on site or in specialist vaults, such as at auction houses.

In addition, the borrowers go through fraud checks (although not credit checks).

It's not always just about the items of property

Valuing the item sensibly is by far the most important task.

And yet, unusually, Unbolted also now goes a step further when there is a business borrower that is borrowing a quarter-of-a-million or more against a variety of different items of property.

It runs some checks on the borrower itself, it gets a personal guarantee and can pursue the business itself for outstanding debts.

This means that if items can't be sold for enough to cover all the loan and outstanding interest, Unbolted can also now pursue the directors personally for the difference and look to the business's other, non-pawned assets, to recover the amounts due.

Other processes that pawn lending providers could do

There are other ways to reduce the risk of losses in this kind of lending.

Pawn lenders could take extra steps far beyond any normal ones to ensure that borrowers understand the risks and that it has cast-iron proof they understand, making any legal case watertight. Indeed, this would have probably saved Unbolted from one or two headaches in the past.

Pawn lenders could also attempt, where possible, to find out more about how the borrower intends to repay, and how long it really needs to borrow for, rather than offering the same standard loan length to all.

Read the Unbolted Review.