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Originally Posted by savedfrommyspokes
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Interesting, thanks for sharing that. Not implausible at all, but would definitely indicate some major business mistakes on a company's part that was making such loans, and didn't fully take into consideration the potential volatile nature of the "assets" being held as collateral. Most banks/lenders like to see at least a 20%, or more, down payment on a home loan so they have a sufficient buffer should they end up having to take back the property and sell it on a defaulted loan to recoup what they lent out. But house and land values are usually somewhat slow to change, and normally do not go down.
One would think that sports cards would be considered a very risky, non-traditional type of collateral, with an extremely volatile value nature. Personally, if it were me running such a company, I would be downright scared to offer a loan on more than say 25%-30% of a sports card's deemed value, and even then I would be constantly worried. I would also think that there would be some clause in such a loan agreement that called for a constant measurement/monitoring of the value of the underlying collateral, and that if it was deemed to fall below a certain level, the borrower would be subject to something similar to a "margin call" that occurs when people borrow against the value of stocks they own, and those stock prices fall below a certain level/price. I've never been involved in such a loan/advance based on sports cards, nor seen any agreement for one, so I don't know exactly what any such lender's specific loan terms may be. Nor if their loan agreements call for them being able to go back against a borrower for the balance of what they're owed if the card(s) used as collateral were sold, but didn't cover the full amount of the loan given out and still owed, plus interest, etc.