How to Borrow Against Jewelry

by Steve Lander

If you need to get money relatively quickly, taking out a loan secured by jewelry could be an option. While pawn shops are one of the best known ways to get money out of your valuable assets, they aren't the only ones. Dedicated jewelry lenders and even banks may accept your jewelry as collateral and make you a loan. In some cases, their terms will be more favorable than those offered by pawn shops.

Pawn Shops

Pawn shops provide loans based on the value of items. Typically, the pawn shop will offer you a fraction of the item's value and require you to renew the loan periodically -- anywhere from one to four months is a common time frame. As long as you keep paying on your pawn loan, your jewelry will stay in storage until you can redeem it. If you miss a payment, however, the pawn shop will keep your item and sell it, usually for a profit. Pawn shops are heavily regulated, but there is still room for variation between brokers, since the regulations set maximum but not minimum amounts. At the same time, different shops may value your jewelry differently, so shopping around can be a wise option.

Secured Jewelry Lenders

Instead of working with a pawn shop, secured jewelry lenders may be another option. These organizations specialize in working exclusively with jewelry and may be able to lend you a higher percentage of your jewelry's value. While they work much like pawn shops in that your property will be sold if you don't make your payments, they sometimes also charge lower interest rates and storage fees, making it more affordable to borrow from them.

Bank Loans

While home loans and car loans are traditional forms of collateral-backed loans, some banks and credit unions will make loans that are secured by jewelry. Before making the loan, the lender will usually require you to provide a collateral appraisal that establishes the value of the jewelry in terms of what it can be quickly sold for. Most banks probably won't be interested in making a small loan, so you may need to have a relatively large and valuable piece of jewelry to go this route.

Common Features

Every type of lender will almost always want to hold on to the piece of jewelry while it secures their loan. This protects their interest in it. At the same time, bear in mind that some lenders may be more interested in the value of your collateral than in the payments you can make on it. While a bank may want to receive the interest payments, a pawn shop that knows it can quickly sell your jewelry for twice what it lent might be more motivated to have you default on your loan.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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