Occasionally, wealthy individuals who own luxury assets may need quick cash to fulfill their financial obligations or take advantage of new business opportunities. While being wealthy often means having good credit, getting loans through traditional banks or credit providers can be slow and tedious. 

The need for short-term credit without going through the tiresome process of obtaining a conventional loan has given rise to a growing trend of luxury asset financing. People have been collecting loans with their assets as collateral for years. However, while loans with cars or real estate collateral are more common, getting a watch collateral loan is only starting to gain popularity. In this post, we will explore the details of this growing trend to understand how it works and why it is such a good idea.   

Understanding the Trend: Why Watches?

A luxury watch loan is a short-term capital obtained using your high-end watch (Rolex, Patek Philippe, Richard Mille, and other high-priced watches) as collateral. With this type of loan, the lender takes your watch as security to guarantee repayment. The borrower will be able to retrieve the luxury timepiece as soon as the principal and interest on the loan are repaid.  

Securing a loan with a highly priced luxury watch is a niche type of luxury asset financing. While any kind of asset can be used to secure a loan, firms like the AMETA Finance Group specialize in providing funds to people who want to use their high-end watches as collateral. 

In recent years, more and more people have been turning to this option to secure short-term funding because of how quick, safe, and efficient it is. Most people already consider luxury watches to be more than fashion accessories. These watches are either too expensive or too fancy to be worn daily, so they mostly end up being locked away in vaults to be worn once or twice a year (or never). 

Securing a loan with this asset as collateral is a flexible option that can provide access to short-term capital of up to $5,000,000 within 24 to 28 hours without liquidating your prized high-value timepiece. 

Factors Driving the Trend 

Luxury asset financing isn’t exactly a new trend. People have been using assets like cars, houses, and even expensive artwork to secure funding for a long time. Yet, it has remained a niche type of funding understood by few people. 

More recently, this form of financing has been gaining popularity, especially for those who want to use their luxury watch as collateral. People are beginning to realize this is a simple and discreet way to secure funding. The following are some of the major factors driving the popularity of this form of luxury asset financing. 

Greater Recognition Of The Value Of Luxury Investments 

In recent years, luxury assets have been proving their worth as dependable financial assets instead of just glamorous toys that people buy to satisfy their craving for vanity. Luxury watches from brands like Rolex, Patek, or Audemars Piguet don’t just retain their value for a long time, many models even sell for a higher premium in the pre-owned market than their original purchase price. While the luxury asset market is still subject to volatility, many assets (some of which cost millions of dollars) have performed even better than traditional forms of investment like gold.  As a result, people are starting to recognize their value as viable investments that will fetch good returns under the right conditions. 

Lack Of Trust In Traditional Institutions 

Due to scandals, failures, and tedious processes, people no longer consider traditional institutions like banks and conventional credit providers as safe and reliable as they used to be. This loss of faith in traditional institutions motivates people to seek alternative funding sources.  Private collateral-based lending companies are typically more open and offer a more flexible process than traditional alternatives. 

Convenient Online Options 

The internet has made getting everything faster and more convenient, including luxury asset-backed financing. Many companies that operate in this niche have online platforms where you can carry out the entire application process from start to finish without visiting a physical office address. All you have to do is provide information about your asset and you’ll get a loan offer within a few hours. Once approved payments are wired electronically and repayments are online as well, simplifying the entire process. 

Changing Attitude Towards Asset Pawning 

In a way, asset-based lending is an offshoot of asset pawning. In the past, this act was plagued by desperation on the part of the asset owner and the greed of shady pawnshop owners. Those days of shady deals and clandestine meetings are long gone now. Instead, people now favor the most financially savvy means to meet your goals as long as they’re legal. 

This change in attitude has also been met by a reorganization and modernization of pawn-shop services to make them more respected. Many pawn loan service providers are fully registered financial service providers bound by the same law as other lenders. This makes them as trustworthy and possibly better organized than traditional institutions providing similar lending services. 

How do Watch-Backed Loans Work? 

The process of securing a loan on watches is pretty straightforward. Most lenders offer online platforms where borrowers can initiate transactions through a simple virtual process. Here’s a brief overview of how the process typically works. 

• Online application: for many lenders, the application process is initiated by the borrower filling out an online form to provide the details of their luxury asset. Some of the details that may be required include the brand, model reference number, age, and other details about the condition of the watch. The lender provides an estimated quote based on the information provider, but the loan offer will only be sent after an appraisal. 

• Appraisal: The next step is to have the watch professionally appraised. The borrower has to ship the watch to the lender through a secure and fully insured shipping process. Lenders work with experts to determine the watch's authenticity, condition, and current market value. This will be used to prepare a loan offer. 

• Loan Offer: The lender will send an offer based on the appraised value of the watch. This is typically a percentage of the value of the timepiece. The offer will include the principal loan amount, interest, and other applicable fees. 

• Agreement and Funds Transfer: If the loan offer is accepted, the borrower will sign an agreement, and the requested funds will be sent via electronic transfer. The watch will remain with the lender for safekeeping in a secure vault for the duration of the loan term. The watch can be retrieved once the loan, interest, and any other associated fees have been paid.

Advantages and Disadvantages of Loan on Watches

Using your luxury watch as collateral for a loan allows you to turn your passion for horology into a vital financial tool to secure short-term capital. Some of the major benefits and considerations for this type of loan financing option include: 

Pros 

• Retain your asset: the best thing about asset-backed loans is that you don’t have to lose your prized possession to secure the capital you need. The watch remains a part of your portfolio and will be returned to you as soon as you complete payment. 

• Limited bureaucracy: collateral-based loans are designed to be extremely easy to obtain. There’s no complex paperwork required. Just send in your watch for an appraisal and a loan offer will be sent to you. 

• No credit checks: for borrowers with complex credit situations or those who simply don’t want to have their credit checked, a collateral-based loan is a great option. How much you can get depends on the value of your watch. 

• Speed and discretion: this type of loan is processed quickly and with discretion. Most people will be able to get approval within 24 to 48 hours. Asset-backed loan service providers also maintain the highest level of confidentiality. 

Cons 

• Risk of forfeiture: while an asset-backed loan allows you to retain your asset, that right only subsists if you repay the loan. Failure to make payments (typically for four months) will initiate a foreclosure process for your loan. 

• High interest rate: alternative loan providers typically charge higher rates than traditional institutions. You may also need to pay other fees for shipping and safekeeping, which will add to the total repayment cost. 

• Short-term: collateral-based loans are typically short-term (up to 15 months). The short duration might make repayment difficult for some.

Conclusion 

With asset-based loan services, you get to leverage the value of your timepiece to unlock some instant capital, while retaining ownership of your watch. This is proving to be a smart financial strategy favored by collectors, watch enthusiasts, and luxury asset owners.  Private lending companies like AMETA are providing collateral lending options focused on luxury watches, providing flexibility, favorable terms, and highly competitive interest rates.