Cars, diamonds, gold, stock, art, baseball cards – which collateral holds most sway with bankers when it comes to approving a consumer loan?
We included this somewhat unusual question in the latest installment of our quarterly survey of North American risk managers. We asked bank risk officers which type of collateral, other than real estate, they would prefer for consumer loans, if they had their druthers. Respondents had six choices, ranging from very traditional to not so traditional. Answers are shown in our infographic:
Perhaps not surprisingly, gold was the big winner. Au (as my high school chemistry teacher would say) was favored by 41 percent of respondents.
The next most compelling form of collateral was stock certificates (29 percent), followed by cars at 14 percent. Does that mean bankers have more faith in the stock market than the used-car market?
Further down the list were diamond jewelry (10 percent) and works of art (4 percent). Bringing up the rear was a baseball card collection at 2 percent. So don't plan to leverage your Reggie Jackson rookie card to buy a boat!
While we were obviously being a bit lighthearted with this question, the results are interesting. Although we set up our question by telling respondents to assume that the value of all the items could be verified, there was a clear lean towards traditional types of collateral. I suppose that is to be expected. When money is changing hands, it makes sense that lenders would want to minimize risk – be it real or perceived.