If you have jewelry and you want to use it as collateral for a loan, your first thought might be to take it to a pawn shop. This is not always the best option because a pawn shop typically does not give you the best offer. It is usually better to use a secured jeweler lender.

How Secured Jewelers Differ From Pawn Shops

Many pawn shops almost exclusively deal in jewelry. The difference with a secured jeweler, though, is that they are specialized in offering loans backed by jewelry as collateral. The lenders will have skilled jewelry appraisers or will be appraisers themselves and will be able to better determine how much they should lend to you. They will also be able to offer a lower interest rate and storage fees. Because secured jeweler lenders only sell jewelry, they will be more confident in whether they will be able to move your piece. Contact a business, such as RK & Co. Jewelers for more information. 

Banks Will Rarely Accept Jewelry For A Secured Loan

You may also be able to use jewelry for a secured loan from your bank. However, this may be difficult to achieve since banks sometimes do not want jewelry as collateral for a loan. Banks are more experienced with relying on a credit score alone to determine whether a borrower's creditworthiness. Also, banks usually do not have appraisers on hand who can verify the value of your jewelry. Therefore, you will need to have your jewelry appraised beforehand, at a cost, and may still not receive a loan from the bank afterward. 

What Happens When You Do Not Pay Off Your Loan

If you believe that you will pay off your loan in time, using collateral for a loan can make more sense than using unsecured debt, even if you have great credit. Unsecured debt still carries with it a higher interest rate. Also, you will likely be able to get a secured loan much more quickly. But regardless of where you receive your secured loan from, your jewelry will be sold if you do not pay the minimum on your debt. This outcome will still be better than having to deal with bill collectors and the impact that a default has on your credit score, but you will probably want to avoid using jewelry that has strong sentimental value, such as your wedding ring, even if you believe you will be able to pay the loan back on time.