Lombard finance is a specialised form of lending that allows borrowers to leverage their assets in order to secure UK loans. Lombard finance agreements are highly flexible for those looking to use existing assets to receive funding quickly and invest. So, if you are in need of some extra money and have valued assets that could be offered as collateral, a Lombard loan could certainly be worthwhile. Find out how Lombard finance operates in the UK and more with Magni Finance.
What Is Lombard Finance?
Lombard finance, also known as asset-based lending, is a form of financing that allows borrowers to use their valuable assets as collateral for securing a loan. Originating in Italy, the term ‘Lombard’ refers to Lombard merchants who pioneered the concept of using assets as security for loans. In the modern context, Lombard finance has evolved into a specific financial service offered by institutions that recognise the value of borrowers’ assets and are willing to provide loans based on their assessed worth.
How Do Lombard Loans Work In The UK?
In the UK, Lombard loans function by allowing individuals and businesses to pledge their assets as security in exchange for borrowing funds. The assets accepted as collateral can vary but commonly include tangible assets such as high-value jewellery, luxury vehicles, fine art, yachts, and other high net worth items. Lenders assess the value of the assets and offer loans based on a percentage of their appraised worth.
One of the key features of Lombard loans is that borrowers retain ownership of their assets during the loan term. The lender will hold the assets as collateral, providing security for the loan, but if the borrower fails to repay the money, the lender has the right to sell the assets to recover the outstanding amount. This arrangement allows borrowers to access capital quickly without needing to liquidate their assets entirely.
How Much Can You Borrow With Lombard Finance?
The amount that can be borrowed through Lombard finance is determined by the value of the assets pledged as collateral. The higher the value of the asset, the more you are likely to borrow. Lombard lenders typically offer loans ranging from 50% to 70% of the appraised value of the assets. The exact loan-to-value ratio depends on factors such as the type and condition of the assets, market demand for them, and the lender’s specific policies.
It is worth noting that Lombard finance is primarily focused on the value of the assets rather than the borrower’s credit history or income. As a result, Lombard loans can be an attractive option for individuals and businesses who may have difficulty accessing traditional forms of financing due to credit issues or limited income verification.
Advantages Of Lombard Finance
There are a number of key advantages when it comes to Lombard finance. Not only is it a way for borrowers to have access to quick loans, but Lombard finance also offers flexible repayment terms and no credit limitations, making it a highly appealing route for many.
Access To Liquidity: Lombard finance provides borrowers with a convenient way to unlock the value of their assets and access much-needed capital. It allows individuals and businesses to tap into their asset wealth without having to sell prized possessions.
No Credit Constraints: As a primarily asset-based form of lending, Lombard finance is accessible to borrowers with less-than-perfect credit histories. The focus on collateral allows lenders to provide loans based on the assessed value of the assets rather than strict creditworthiness criteria.
Fast Loan Access: Compared to traditional lending options, Lombard finance offers a streamlined application process with faster approval times. The emphasis on the asset’s value rather than complex financial documentation simplifies the loan evaluation process.
Flexible Repayments: Lombard loans often come with flexible repayment options, allowing borrowers to tailor the terms to their financial situation. UK lenders may provide options such as interest-only payments or longer repayment periods to accommodate borrowers’ needs.
Limitations Of Lombard Finance
Despite its benefits, there are some limitations of Lombard finance which borrowers should be aware of such as hidden costs, potential value fluctuations, loss of assets and more. If you are concerned or unsure about Lombard finance, it is advised to speak to a specialist UK broker, lender, or advisor.
Risk Of Losing Assets: Borrowers must understand that if they are unable to repay the loan as per the agreed terms, the lender has the right to sell the pledged assets to recover the borrowed amount.
Potential Value Fluctuations: The value of certain assets, such as fine art or collectibles, can be subject to market fluctuations. If the value of the pledged assets declines significantly, it may affect the borrower’s borrowing capacity or require additional collateral to maintain the loan.
Extra Associated Costs: The appraisal of assets can incur additional expenses such as valuation fees and insurance costs which may position Lombard financing as unviable for some.
Who Is Eligible For Lombard Loans?
Lombard loans are available to a wide range of individuals and businesses in the UK. There may be different policies and preferences regarding the types of assets lenders will accept as collateral so be sure to consult with lenders and specialists prior to the agreement.
The eligibility criteria can also vary from lender to lender, but typically borrowers can expect the following:
Age: Be at least 18 years old.
Proof of Ownership: Proof that you own the assets being pledged as collateral.
Legal Acquisition: Demonstratable legal acquisition of the assets.
Residence: Evidence of residence and identity e.g. passport.
Further Specific Requirements: Anything set out by the lender.
What Is The Application Process For Lombard Finance?
If Lombard finance could work for you, the first stage will be to find a trusted UK lender. At Magni Finance, we work with a range of specialist lenders in order to obtain the most competitive finance solutions on the market. Once you have identified a lender, you can begin your Lombard finance application.
Asset Evaluation: As the borrower you will provide information about the assets you wish to pledge as collateral. The lender will then assesses the value and marketability of the assets through an appraisal process.
Loan Proposal: Based on the appraised value of the assets, the lender will present the borrower with a loan proposal outlining the loan amount, interest rate, repayment terms, and any other applicable fees. You may be asked to provide further documentation at this stage to support your loan application.
Lombard Loan Agreement: Once both parties have agreed on the terms, a loan agreement is drafted, and the borrower will transfer the assets to the lender’s custody as collateral. Once received, the lender will disburse the loan amount into your designated account shortly after.
Apply For Lombard Finance Today
If you are seeking a practical financing solution, Lombard finance could be just the thing. With a streamlined application process, repayment flexibility, and a focus on collateral over creditworthiness, Lombard loans offer a range of benefits for borrowers.
To find out more about Lombard finance in the UK, feel free to speak to the Magni Finance team where we have over 25 years of experience. At Magni Finance, we are committed to finding the right solutions for our clients, no matter the complexity of the situation. Get in touch today to begin your Lombard finance application.