Assets You Can Tie to a Loan in the UK
It’s a common misconception that loans and lending are all about liquid cash. In fact, asset-based lending is becoming increasingly popular across the nation as it is an often viable way for individuals and business owners to get access to capital they desperately need.
However, there are a few risks to asset-tying when it comes to borrowing for home and business – especially when properties and vehicles are at stake!
So, let’s look at what asset-based lending is, what the benefits and the risks are, and what you need to qualify for an asset-based loan in the UK.
What Is Asset-Based Lending in the UK?
As the name suggests, asset-based lending focuses on tying your physical assets to a promise that you’ll pay back any money you borrow. The idea is that the physical assets work as security (or collateral) against the loan – also know as a secured loan.
So, should there be any issue with the loan, the bank, loan company, or wherever you claim money from can reclaim these assets from you – instead of pursuing you for unpaid debt.
As you can likely imagine, there are a few rules and regulations in play with regard to what you can and can’t tie to borrowed money. After all, the bank will not likely want eBay fodder as collateral for your loan!
What Assets Can You Tie to Your Loan in the UK?
Of course, the physical assets that you can tie to your loan will depend on the specific company that is lending you money. They will inform you as to what assets they deem acceptable for their terms of the loan.
However, generally speaking, most loan companies in the UK (that provide asset-based loans), accept stocks, vehicles, commercial machinery, and even property. In some cases, you can even tie your home to an asset-based loan – but you’ll need to be exceptionally sure you can afford to pay it all back on an agreed schedule, or your lender can take your property as payment.
Some also accept intellectual properties and even take on debtor cases (i.e. people or other businesses that owe money to you or your business).
What Are the Benefits of Asset-Based Lending?
There are multiple benefits to asset-based lending, including flexibility, speed, stability, and greater control for you.
For example, when it comes to speed, asset-based loans can often process quicker than liquid cash lending. In fact, depending on the company you are working with, you could get a decision on a major loan inside a couple of weeks.
Depending on the terms of your agreement, you may also be able to borrow, and keep the equity.
Other benefits of asset-based lending include the fact that, for businesses, you could improve your cash flow. For those on relatively low incomes looking to fund a private project or two, you can also take on a private arrangement with an asset as collateral.
What’s more, did you know that you have access to other forms of finance with asset-based lending? By agreeing to tie assets to your loan agreement, you can open up lots of different doors – mainly because you’re giving the lender added confidence.
Are There Risks With Asset-Based Lending?
As is the case with any kind of loan, asset-based lending does have its risks. For example, to be eligible for an asset-based loan, you must first pass a hard credit check. This kind of check will automatically appear on your credit report, and could affect your credit rating for time to come.
Again, as with other kinds of loans, charges are also applicable on an asset-based loan. For example, if you have late, or early payments, or you default on payments altogether, then you could face significant charges.
Of course, the biggest risk that comes with asset-based lending is that you could lose your assets altogether. If you do not make your repayments, then the company you are working with could take your asset and sell it on at profit. That’s why it’s worth thinking twice before tying your home to this kind of deal!
How Do I Get an Asset-Based Loan in the UK?
Not everyone is eligible for an asset-based loan in the UK, and you will need to meet a few criteria before any company agrees to take you on as a client.
First of all, you will need to have accrued valuable assets that you can use for such a high-profile loan. You’ll need an attractive stock portfolio, a home or car that could sell to pay for your debts, and/or any commercial equipment applicable (if you’re borrowing for business purposes).
The amount of money that you are eligible for will also depend on the value of your assets, and your credit history. The healthier your credit, the better the deals you can expect.
If borrowing for business, most loan companies will also take a detailed look at your financial and trading history, and your current financial situation to determine whether or not you would be a safe borrower.
As is the case with all loans in the UK, you will obviously need to be at least 18 years old, and hold a current bank account before lenders will consider your case.
Asset-based loans can offer a great way of securing a loan – you’re giving lenders a lot of extra confidence. However, there’s always the risk that if you default, you lose whatever you choose to tie to the arrangement. These are not deals you should ever enter into lightly!
If you own assets but are unsure of the risks involved with potentially losing them, it may be worth considering smaller scale lending. Why not consider a bridging loan or unsecured loans, for example? Asset tying is a good idea if you’re confident you can pay back what your lender demands – and you have the credit score to back up your intentions.
Getting a loan of over £25,000 on an unsecured basis isn’t always easy. However, anything lower than that, there’s plenty of platforms where you can compare loans from products like payday loans and loans for people with bad credit.
You can apply now and use LoanBird as a tool to check your eligibility across most of the UK’s lenders.