A Full Guide to Luxury Asset Finance
Luxury asset loans are an unrestrictive, short-term finance method for “bridging a gap”, diversification, or if you are asset rich while cash is currently unavailable.
These are personal asset loans that allow any luxury asset to be used for collateral - resulting in fast, flexible financing of luxury goods or, perhaps, for property development. Its purposes are numerous and diverse, yet it differs from conventional bridging in some important ways.
What is luxury asset finance?
A luxury asset loan is a type of personal loan, that works similarly to bridging; a short-term secured loan allows a borrower a lot of money quickly and at short notice.
While the mechanics of luxury asset finance is similar to that of bridging loans, the uses of the capital raised are most often directed to other high-value assets. Asset finance of this nature tends to be best utilised by high-net-worth individuals who own valuable portfolios already encompassing luxury assets or property.
Asset finance is mainly to quickly deliver equity from a luxury asset, for liquidity and free up capital to be spent elsewhere – usually on another luxury asset.
How does luxury asset finance work?
As stated above, these are short-term loans that are asset-backed and are typically secured by an asset of significant value.
An application must be made for the purposes of the loan, detailing the security offered and the intended exit strategy. Lenders can vary on the necessary criteria for bridging loans, a property typically secures standard loans for short-term finance.
The difference with luxury asset finance is that it can also be secured with numerous luxury assets and incorporate property if necessary.
These standard bridging loans can often require detailed information from the borrower – credit checks, or general scrutiny may fall on the borrower to provide certain information to assure a lender.
A luxury asset loan differs because there aren’t the same restrictions or scrutiny placed on the borrower. Lenders are flexible, and the only criterion is to assess the luxury asset offered as security. Funding can be secured quickly and with as little paperwork as possible.
Here is an example of how luxury asset finance can work:
Who is it for, and how can luxury asset finance be useful?
Luxury asset finance is primarily for high-net-worth individuals, who will already own diverse and valuable portfolios containing luxury assets. It is first and foremost, a short-term loan for asset-rich individuals.
As a result of luxury asset finance, these individuals maintain liquidity while having the means to sustain a high-flying lifestyle.
They may wish to make better use of their assets without simply selling them. Luxury asset finance provides a simple and effective way to diversify during periods when cash may be wrapped up in numerous assets.
The benefits of choosing asset finance are:
- Zero charges for evaluating the asset, or multiple assets.
- Bypass legal costs (typical for any other finance product)
- Quick access to funding (usually within days)
- No income or credit checks
Of course, there must be a sufficient exit strategy in place, but due to the targeted demographic of luxury asset finance, a high-net-worth individual would be able to repay the loan through many methods (and usually as quickly as possible to negate higher interest payments) – forms of repaying the loan may come through income, or business sales, or property sales etc.
Additionally, this type of finance can also work in the traditional bridging way. It can be useful for property finance, specifically for property developers and investors.
The funds from the loan can be used to resolve cash shortfalls when it comes to financing property projects, encompassing renovations, self-builds or general property development. This is the flexibility of luxury asset finance, as it can be utilised in many different ways suited to the borrower.
Which assets can be used as collateral?
The types of luxury assets that can be used are varied. Anything can be used as collateral if it can be evaluated and is of significant value.
Assets might include, but are not limited to:
- Super-cars or classic cars; super yachts; private aircraft
- Luxury items – watches, jewellery, vintage goods
- Property
- Precious metals – gold, or bullion
- Jewellery
- Luxury watches
- Fine Art
The value of such assets will be varied, and evaluated on a case-by-case basis – there is no simple answer for what luxury goods can be used as collateral, besides the fact that they must be highly valued items.
How much will luxury asset finance cost?
With luxury asset finance, a considerable amount of the typical fees – such as legal or valuation fees - that come with short-term loans are not applicable. Meaning it can be inexpensive, all things considered, to apply for and take out a personal asset loan.
However, what remains true, is the higher interest rates – luxury asset finance is still a short-term loan, so interest rates reflect this fact.
This can be mitigated somewhat by “Rolled-up” interest. Interest will only be paid on the duration the loan is outstanding; these will be monthly payments. Meaning, if you can repay as quickly as possible, you will bypass extended interest payments on the loan.
For high-net-worth clients, it can be less of an issue to repay within a shorter time, before the full term of the loan. Therefore luxury asset finance the best method for diversifying a portfolio, and acquiring liquidity from your assets quickly and flexibly without worrying about mounting monthly costs.
Interest rates applied to the actual loan can also be affected by lenders' criteria and several other factors, such as;
- Your loan size, and for how long it will last
- What type of loan you need
- The Loan-to-value ratio (LTV) - you can borrow based on the lender's LTV, which is calculated by dividing the loan amount by the securities value – the security valuation will impact the interest paid monthly.
- The valuation of your asset(s) – a lender’s evaluation takes into account many factors, and what your asset is valued at will affect the interest rate – the location of a property can have an impact on valuation, for instance.
How can I get a luxury asset loan?
Luxury asset finance is not typically offered by banks, and you wouldn’t be able to secure these types of loans from high-street banks. Specialised lenders only offer them due to the nature of high-value collateral.
This is beneficial, as mainstream lenders do not typically allow flexibility or specialised circumstances incorporated into a short-term loan. However, applying for luxury asset finance will require finding a lender to meet your needs.
At Clifton Private Finance, we help clients find suitable lenders for their circumstances. For luxury asset finance, it is best to seek out experienced finance brokers that can aid you in finding the best possible deal.
It is useful to navigate the entire short-term market and pinpoint the best asset finance available while avoiding common pitfalls. With the help of a broker, the process will be greatly expedited.
For the inexperienced, this can be challenging to do alone. Here’s what an experienced broker can do for you when it comes to applying;
- Brokers will give access to a market of lenders that may be unavailable to you as an individual – they will get you comparative quotes and find a suitable and willing funder to offer a loan.
- Brokers advise on the best course of action as to whether asset finance is an option for you, how to proceed and answer any questions you may have.
- Brokers work to create a competitive environment for lenders, which can lower rates, making them more favourable to borrowers overall.
- Brokers know how to present their clients' situations to lenders, making borrowers a more appealing option.
- They will help you understand and guide you through the entire process – dealing with documentation, giving you an indicative quote, and dealing with lenders on your behalf.
- Ultimately, brokers will work through your interests to secure you the best deal.
With a specialist broker, you can get the advice needed to point you toward the best deal in luxury asset finance. It can save time and often skip over any challenges presented by going to lenders directly.
We have access to the short-term loan market and have established relationships with specialist lenders. And most importantly, we can help you get your luxury asset finance at a favourable rate.
What We Can Offer
Are you in need of asset finance? Get in contact with our team, and we can help you navigate the process quickly and without stress.
Short-term loans, such as asset finance, offer speed and flexibility when it comes to solutions; resolving cash flow problems, making the most out of your assets when liquidity is an issue, or perhaps, simply utilising luxury asset finance to purchase additional assets.
With our experience in short-term financing, we can assist you in finding the right loan for your circumstances.
We have an extensive network of lenders we deal with regularly, who specialise in this kind of asset finance.
We can help with meeting tight deadlines & provide fast and professional service.
