Get the money you need and hang onto that beautiful piece you love.
If fine art is a considerable part of your net worth, it may be advantageous to use it as collateral for a loan. With the fine-art market booming, you could borrow the amount you need and qualify for competitive loan terms. But as with all secured loans, default means you’ll lose your collateral
Can I use my fine art as collateral for a loan?
Yes, it’s possible to use fine art as collateral for a loan. Lenders that specialize in using artwork as collateral generally provide loans from 30% to 80% of the piece’s value. Your piece will likely need to meet some specific requirements, and the overall market will be used to assess the value of a piece. Supply and demand, auction data, records and information about the artist are just a few factors that can be used in determining if your piece is acceptable as collateral.
How will the value of my artwork be determined?
An appraisal will take place either virtually or in person to determine the value of your artwork. Things that will be considered include:
- The artist
- Previous auction record
- Private ownership record
- Condition of the artwork
- Current market value of similar pieces
How the process works
Each lender may have processes that vary slightly, but the basic steps are typically similar.
- Contact the lender. Give details about the art you’d like to use and what type of loan you’re looking for if more than one type is offered.
- Schedule an appraisal. This will likely be done at an office location, though some accommodations may be made if your piece is valuable enough or difficult to transport.
- Review the terms. You’ll be able to accept or reject the terms offered to you and go over any questions you may have.
- Schedule for the art to be transported. Either you will transport or the lender will transport your piece to a secure facility.
- Begin repayments. Once the loan is paid off, your art is returned to you.
Which lenders offer art-backed loans?
| APR | Loan amount | Loan terms | How it works | US locations | |
|---|---|---|---|---|---|
| Levart | From 2.93% | $5,000 to $1 million | 4 months | Apply online, accept the terms and you transport the art to a Levart-partnered secure facility | California and New York |
| Borro | Bridge loans: From 2.99% Term loans: From 0.99% | Up to $5,000,000 | Bridge loans: 6 to 12 months Term loans: 18, 24 or 36 months for loans over $100,000 | Apply online or by phone, accept the terms and you transport the art to one of Borro’s secure storage facilities | California and New York, loans offered to all 50 states |
| MyBridgeNow | From 3% | $5,000 to $500,000 | 30 days with extensions available | Schedule an appointment for appraisal, accept the terms and your art will be secured in the Twin Cities area | Minnesota |
| Athena Art Finance | Calculated based on artwork | $1 million and up | Up to 5 years | Contact the lender by phone or email to start, art is appraised by an independent inspector, you may be able to retain possession if you live in the US | New York, loans offered across the country and internationally |
What are the benefits of using my fine art as collateral for a loan?
- Potentially borrow up to 80% of your fine artwork’s value
- Secured loans generally come with a lower interest rates
- You don’t lose ownership of your artwork if you pay back the loan per the agreement
- These are nonrecourse loans, meaning your art serves as the collateral and you don’t need to offer a personal guarantee
What are some disadvantages of art-backed lending?
- You may have to pay for the transportation to and from the designated holding facility
- Locations of lenders that specialize in these loans are limited
- Defaulting on the loan can mean the loss of your fine art and potentially collections actions
- Despite security measures, there’s always the risk of something happening to your piece if it’s in the lender’s possession
7 features to consider when choosing a lender
Here are seven additional factors to consider aside from the standard APR, loan term, amount available to borrow and turnaround time:
- Appraisal. What is the lender’s appraisal process like? Find out if you’ll need to send in high-quality pictures and details, if an appraiser will come to your home, if you need to ship your piece somewhere or if you’ll have to take the piece to the lender.
- Loan-to-value ratio. What percentage of the value of your artwork can you borrow?
- Credit check. Look into whether the lender requires a credit check for you to be approved for an art-backed loan.
- Insurance policy. If the lender takes possession of the piece, make sure it remains properly insured. Take into consideration if the lender charges extra for the insurance or not.
- Fees. Certain lenders require that you front the cost of transportation, others provide it free of charge. Prepayment fees and late fees may also add to the cost of your loan, so inquire with lenders about fee structures.
- Extensions. Hiccups can happen and you may be unable to pay the loan off by the term. See if potential lenders offer extensions or are willing to renegotiate terms. Some are willing to so long as you can pay the interest due each month.
- Default policy. Possibly the biggest thing to consider is the company’s default policy. With your fine artwork on the line, it’s important to consider and fully understand the terms of a default should it come to that.
Unsecured personal loans to consider
Want to loan that doesn’t require collateral instead? Compare these online providers.
Bottom line
Art is often worth more to its owner than the market value. Instead of selling a treasured piece, you may be able to work with a lender that will take the piece as collateral. While it can be a good way to get a loan without a credit check, it can also impact your credit score in other ways if you don’t meet the terms of the loan. Be sure to compare your options for secured loans and unsecured loans and fully assess the risks and benefits before you commit to any loan.
