Borrowing against your designer closet is a practical financial solution. Instead of going through the lengthy processes of bank loans, this option allows you to use luxury goods like designer handbags, fine jewelry, and watches as collateral for loans. It effectively turns your high-end items into a revolving credit source, giving you access to funds without waiting several weeks for bank approvals or selling your valuable possessions.
Using designer items as collateral is gaining traction as more Arizonans recognize its liquidity while retaining ownership. Also, with the growing market for high-end fashion, borrowing against these assets offers a practical way to tap into their value. This approach provides financial flexibility and maintains these luxury pieces’ emotional and investment worth. Allow us to explain this concept further below.
What Are Loans Against Luxury Goods?
Borrowing against luxury items is a financial strategy where you use your high-end possessions as collateral to secure a loan (see secured loans). Instead of selling and losing your valuable items, you pledge them to a lender in exchange for a loan based on their appraised value. This method allows you to retain ownership and retrieve the items after replaying the loan.
How Does Revolving Credit Work in This Context?
Revolving credit refers to a credit line that you can borrow against, repay, and borrow again, like a credit card. It operates similarly when applied to luxury goods—you can borrow against the appraised value of your luxury items, repay the loan over time, and borrow again as needed, all while keeping your items safe and intact. This strategy offers a flexible and reusable source of credit secured by your valuable possessions.
For example, in 2013, homemaker Maggie Wong made headlines when she told The Wall Street Journal that she uses her designer handbags to secure loans. Wong used the money to pay for essentials, including her son’s school tuition. “I have no time for my local bank’s long and complicated application procedures,” she revealed. After repaying one loan, she uses the same items as collateral to acquire another loan.
How to Get a Loan in AZ Using Your Designer Items
Do you need a loan but don’t have real estate to put down as collateral? Don’t worry—just take a good look inside your closet. Biltmore Loan and Jewelry, a Scottsdale-based upscale collateral lender and outright buyer, accepts luxury items from Louis Vuitton, Chanel, Gucci, Dior, Hermès, Audemars Piguet, Cartier, and more as collateral. Here’s how it works:
Evaluation and Appraisal Process
The first step in borrowing against your designer closet is to get your luxury items evaluated and appraised. This process determines the current market value of your assets, which will dictate the loan amount you can receive. Typically, this involves:
- Selecting items: Choose high-value items such as designer bags, wallets (SLGs), jewelry, scarves, and timepieces from luxury brands. Non-branded jewelry made with high-quality precious metals and gemstones also counts.
- Professional appraisal: Consult an appraiser who specializes in luxury goods, such as the professionals here at Biltmore Loan and Jewelry. They will examine the condition, authenticity, brand, and market demand of your items.
- Market comparison: The appraiser will compare your items with recent sales of similar items to estimate their current value.
- Report generation: You will receive a detailed appraisal report.
The amount of money you can borrow depends on the appraisal’s accuracy and thoroughness. Ensure you choose a reputable appraiser to get a fair and precise valuation.
Loan Application Process
After the appraisal process, the next step is the loan application. Here’s how it works in general:
- Choosing a lender: If you reside in Phoenix, Arizona, Biltmore Loan and Jewelry is one of the trusted lenders in Scottsdale. If you live elsewhere, research and select a lending company specializing in loans against luxury items. Look for those with favorable terms and a good reputation.
- Submitting documentation: In addition to the appraisal report, some lenders may request additional information, such as proof of ownership and personal identification, so be ready to provide any further details they may need.
- Loan offer: Based on the appraisal and your documentation, the lender will make an offer, which includes the loan amount, interest rate, late payment charges, repayment terms, and any additional fees.
- Agreement signing: If you accept the lender’s offer, you need to sign an agreement outlining the terms and conditions. Ensure you understand everything before signing.
- Receiving funds: You will receive the agreed-upon loan amount, usually via spot cash or direct deposit to your bank account.
Keep in mind that this process is designed to be straightforward. Review all terms to avoid unwanted surprises down the line.
Is It Worth It? Benefits of Collateral Loans
These advantages can make borrowing against luxury items a more attractive option compared to traditional borrowing methods:
1. Financial Flexibility
One of the many benefits of borrowing against luxury items is the financial flexibility it offers. By using high-value possessions as collateral, you can get cash quickly without selling your assets, which can be particularly useful for unexpected expenses, investment opportunities, and debt consolidation. Discover the Reasons to Get a Loan in Phoenix, Arizona for more information on this financial opinion.
2. Favorable Loan Terms
Borrowing against designer items can result in higher loan amounts, lower interest rates, and flexible repayment options.
3. Maintaining Ownership
Another big advantage is retaining ownership of your luxury items. Unlike selling, where you lose the items permanently, borrowing against them ensures they remain yours as long as you don’t default on the loan. This retention of ownership is beneficial for several reasons:
- Emotional value: Many luxury items have sentimental value, whether they are heirlooms, gifts, or items bought to commemorate personal achievements.
- Future use: You can continue to use and enjoy your items after repaying the loan.
- Investment value: High-end items often appreciate in value, allowing you to benefit from future increases in their worth.
Read our previous article titled, Should You Borrow Money Using Luxury Items as Collateral?, to learn more about the pros and cons.
Get Approved for a Quick Collateral Loan in Scottsdale, AZ
Now that you know how it works, why not use your luxury items as revolving credit? If you want to experience the financial flexibility, favorable loan terms, and ownership retention associated with borrowing against luxury items, visit our Scottsdale office today. Our appraisers will help you determine the value of your designer closet, allowing you to use your fashion investments as a financial cushion.