Collateral Loans on Art Gain Popularity in a Struggling Economy with a Booming Art Market
The art world is experiencing a boom right now with prices higher than ever. According to the New York Times, art sales at galleries and auction houses in New York alone have reached an estimated $8 billion a year. Modern contemporary art is especially popular and the wealthy are paying what some feel are ridiculous prices for works by the most popular artists. Some are calling it an art bubble with expectations that it has to burst sooner or later. There is controversy and speculation, but one thing is certain; art today has become not only a consumable good but also a liquid asset. An art collection can be considered an investment whether it’s a trendy piece purchased to hang on a wall or a much loved collection that’s been built through the years.
As the value of art increases more and more collectors are taking advantage of the equity they have in their collections. Collectors have realized their Picasso’s, Warhol’s and Lichtenstein’s can be used as collateral. High-end pawn shops are loaning money to the wealthy for their works of art. Collateral loans on art are certainly not new, however they are gaining in popularity. For many, art is a passion and selling part of their collection is not an option, but a collateral loan allows the owner to access equity and retain possession of their cherished piece. For others taking out pawn loan allows them to hang on to their investment as it further appreciates. It makes sense for collectors in need of cash to pawn their art at a high-end pawn shop, where loans can reach six figures.
It also makes sense that wealthy collectors are turning to alternative forms of credit during this recession and subsequent credit crunch. Pawn loans don’t require credit checks and will not negatively affect credit in the event that the loan cannot be repaid. For those who need liquid cash quickly, whether it’s to finance more art, a business deal, a real estate transaction or just to take care of an unexpected emergency, a pawn loan puts money in the hand on the same day. Applications for bank loans, even for the wealthy, are difficult to get approved. For those who can get approved, the process takes weeks or more, and when trying to finance a business transaction or purchase a new piece for a collection weeks can mean a lost opportunity.
High-end pawn shops cater to the wealthy and many specialize in fine art. Modern and contemporary art is the most popular on the market and likely to bring the highest dollar amount. Art is subjective, and much like the art market where prices and tastes can seem arbitrary, a pawn broker’s decision to loan or not to loan and at what amount is based on more than just estimated value of the piece. Getting a pawn loan on art is, however, a fairly simple process. Pawn shops are looking for provenance, including auction records, appraisals, certificates of authenticity, and original receipts. They are looking for authenticity from the collector as well as their own expert opinion on the value of the piece. Once authenticity and value have been determined an offer can be made. The economy may still be struggling, but the art market is booming and it’s a good time for collectors to take advantage of the equity that’s hanging on their wall.