How to Borrow Against Jewelry

Are you struggling to pay your bills due to a financial emergency? Don’t worry, you are not alone. Studies show that about ​36 percent​ of Americans cannot deal with a $400 emergency expense. In addition, ​45 percent​ of people lack at least three months of emergency funds to cater for any issues that arise.

Knowing how the situation is across the country is the first step toward dealing with your financial problems. And it pays to explore other cash-generating options. Therefore, if you need to get money relatively quickly, taking out a jewelry loan could be an option worth exploring.

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 give you a loan. In some cases, their terms will be more favorable than those offered by pawn shops.

Pawn shops provide jewelry loans based on the value of items people offer them. 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. However, if you miss a payment, the pawn shop will keep your item and sell it, usually for a profit.

Pawn shops operate under heavy regulations, such as the USA Patriot Act and the Gramm-Leach-Bliley Financial Services Modernization Act. 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 is the wise thing to do.

​Read More​: What to Pawn for Money

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, say, loans against rings, at 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, secured jewelry lenders sometimes also charge lower interest rates and storage fees, making it more affordable to borrow jewelry loans from them. In addition, these loans usually do not require any credit checks and will not impact your credit scores.

While home loans and car loans are traditional forms of collateral-backed loans, some banks and credit unions will give you loans that are secured by jewelry.

Before advancing 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.

​Read More​: Why Do Banks Require Collateral to Make Loans?

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 jewelry loan.