Borro interest rates can exceed 47% APR

Do you need rental loans in excess of $1000? Where many local loan companies may balk at winning you the money you need to cover multiple months of rent and/or security deposit, an online lender has begun sending consultants directly to applicants who need higher loan amounts and have some item of value to secure the loan. While this is an innovative solution for many, Borro interest rates can be much higher than they appear.

Borro provides secured loans to borrowers in the US and UK. The lender specializes in providing higher loan amounts to borrowers that need more cash than other options may offer. Even if you have bad credit and have been denied bad credit loans in the past, Borro can frequently approved applications for higher loan accounts when you have an asset that you can pledge as collateral. We reviewed the lender to see exactly what they have to offer.

How It Works

To receive consideration for a higher value loan, you simply complete the loan application online at the Borro website or you call their toll-free number. You will provide details about the asset that you would like to leverage as collateral in order to guarantee the loan. Borro will provide you with a consultant that will appraise your asset and allow you the opportunity to accept an offer for a loan that is based on the value of your asset. You would only have to turn over possession of the asset once you have agreed to the loan offer.

The loan offer will depend on the appraisal of the asset and it can vary depending on what type of item that you are using. Lower end estimates tend to be loan offers of as little as 30% of the value of your security interest. The lender reports that some offers can be as high as 70% of the value.

Your collateral will be returned to you once the loan is repaid in full. You have the option of either making monthly interest payments or going for several months without making interest payments. Borro recommends that you make monthly interest payments, and they report that roughly half of all borrowers do so.

How Much are Borro Interest Rates?

Rental loans of up to a few thousand dollars carry a monthly interest rate of 3.99%. While that may sound like a bargain, that translates to over 47% when expressed as an annual percentage rate (APR). 47% APR is indeed a very high price to pay for a loan, especially one that is secured by an asset.

You may notice that some borrowers are quoted a monthly interest rate of 2.99% which would mean an APR of over 35%. These quotes however are for loans that exceed $100,000, well in excess of the few thousand dollars that a tenant might seek in a time of need.

Based on the application process, the security interest requirement and the relatively high rate of interest, Borro has a business model that is very similar to that of your local pawnshop. The difference is that Borro utilizes consultants to appraise your asset rather than operate a traditional storefront pawnshop.

Alternatives to Borro

Since Borro closely resembles a pawnshop, the closest alternative would be a local pawnshop that you can visit in person. Some pawnshops can be shady and downright dangerous. National pawnshops have recently begun setting up shop in more affluent communities, giving you a reasonable alternative to Borro and other online lenders.

Loans for rent payments may also be provided by consumer finance companies which offer a range of secured and unsecured personal loans. The interest rates on these loans depend largely on state law and are rarely less than 20% APR. Many borrowers report interest rates on consumer finance loans that exceed 30% APR.

The best alternative can usually be found at your own bank or local credit union. These loans tend to have the lowest interest rates. Of course these loans also require a reasonable credit rating and documented source of income.

Finally you may find zero interest loans or grants through local rental assistance programs. These programs tend to have very strict income requirements that exclude individuals and families that earn substantially more than the federal poverty level.

Borro does provide an interesting option for applicants that need higher loan amounts, have an item of value to pledge as collateral and may suffer from a lower credit score. The lender does seem to be gaining acceptance in more and more communities as an additional option for a household in need. If you need more information, you should contact the lender directly or search for feedback from other borrowers that have used the lender.