Should You Borro?

An Online Pawn Shop?

Got stuff and need cash? Just go to Borro.com and answer a few easy questions about your Rembrandt, or Rolex, or any other high-value personal asset you may have including iPads, iPhones, etc. You’ll get an instant estimate of the maximum amount that Borro can lend to you using that asset as collateral. You can submit multiple assets in one batch to increase your credit line.

Then Borro needs to “appraise” your goods to determine precisely how much to lend you. That means getting the asset(s) to Borro’s New York office, and there are two ways to do that. Most of Borro’s customers choose the company’s “secure courier service.”

Borro sends you a steel, locking shipping container about the size of a safe deposit box. Into it go your items and the box is picked up by a bonded private courier. The other option is to bring your valuables to Borro’s New York office, if you happen to be in that neighborhood.

One a final credit line is determined, Borro deposits the cash into your bank account electronically. It usually takes 1 or 2 business days to clear and then you have cash.

You get your stuff back when you have repaid the loan. Each month, you make an interest payment. And of course, if you don't pay back the loan, you forfeit the goods you've used as collateral.

Yes, it’s a pawn shop… an international pawn shop. Borro originated in the UK and now does business in all 50 of the United States as well. The company lent $50 million in 2013 and just completed a $110 million funding round, most of which will be lent this year. Borro earned $17 million on that $50 million in loans last year.

What Does it Cost?

A $10,000 loan for four months will cost you $500 plus $399 per month, for a total of $2,096. (I did the math, and that works out to about a 21 percent interest rate.) You can get an estimate of costs for other loan amounts from Borro’s free interest calculator.

How anyone dumb enough to pay that kind of interest acquired assets worth $10,000 is one of life’s little mysteries. Some would call it an injustice. But Borro’s growth rate suggests that there are quite a few such people in the U. S. and U. K.

The company serves this market in ways that traditional pawnbrokers do not. Convenience and discretion are the primary benefits that Borro offers. You don’t have to go to the skeevy part of town to hock that Rolex, or be seen by your neighbors entering a suburban pawnshop such as EZ Pawn. (Of course, they may assume you’re buying, not borrowing, but we always tend to assume that people are thinking the worst of us.)

According to Borro, 60% of their loans are taken out by entrepreneurs and small business owners, who need cash but are having trouble getting bank loans. Perhaps these people have maxed out their credit cards, and their relatives are tired of funding their latest sure-fire scheme for making it big. Or maybe they're just not good at math.

Borro may be more generous than low-end pawnshops, too, because it can afford to be. I got a phone call from “Anthony” with Borro while playing around with a request for a loan estimate on a ficititious 5-carat emerald-cut diamond. Anthony said Borro will lend larger amounts on an asset than traditional pawnshops because its clients tend to be lower risks. Also, he said, Borro is “more flexible on monthly payments” than regular pawnshops. I don’t intend to investigate those claims first hand.

Borro is advertising heavily on radio and TV, but they do have some competition. UltraPawn seems to offer better rates (from 2-16%, depending on the value of your item) and also has a business loan program.

Have you ever used an online pawn shop, or would you consider a service like Borro? Your thoughts on this topic are welcome. Post your comment or question below...