Need A Collateral Loan? How To Decide Between A Pawn Shop And A Jewelry Store

Posted on: 17 December 2015

In general, pawn shops and jewelry companies that offer collateral loans on jewelry operate under the same principles. You bring in an item of value which is appraised by a worker at the store. They then offer you a loan price and/or a purchase price. You can decide whether the loan or purchase price suits your needs or not. If you decide to take a loan on your item, the store will hold it while you make payments on your loan, until you have paid your loan in full. If you are unable to make your payments on time, the store gains ownership over your item and can sell it. Both general pawn shops and collateral jewelry lenders can help you liquidate your assets if you have a need for immediate cash. However, there are some subtle differences that you should be aware of between general pawn shops and jewelry stores that offer collateral loans against jewelry. 

How Much Will They Offer? 

Both general pawn brokers and jewelry stores are initially interested in the intrinsic value of your jewelry. This is the price that they would get if they melted down the metal and sold the metal and any gemstones to be used in new jewelry and is significantly less than the price of a new piece of jewelry being sold for the first time. Usually, whether you are selling your jewelry or getting a loan, you will only be offered a percentage of its intrinsic value.

However, because jewelry stores usually have more clients that are interested in purchasing jewelry than pawn shops, it is more likely that they will be able to resell your jewelry as a piece of jewelry rather than melting it down for its parts. When they can resell your jewelry directly to a customer, they will earn more money than its intrinsic worth.  This means that they have a greater incentive to offer you more for your jewelry since they are less likely to lose a large amount of money if you default on your loan. 

What Are Their Interest Rates and Storage Fees? 

Besides paying back your loan you will also have to pay back interest and storage fees to your lender. Most types of collateral loans are covered beneath regulations for pawn shops, which vary based on the state you get the loan in. These regulations limit the amount of interest that a pawn shop or jewelry store can charge you. However, both types of stores can also charge storage fees, which may vary greatly. In general, jewelry store loans tend to be for longer periods than pawn store loans, and they often have lower interest rates that reflect this. You may end up paying similar amounts in interest, or even paying more to a jewelry store, but you will also get the benefit of having a longer repayment plan. 

Since jewelry stores are set up to house expensive jewelry, they can easily accommodate your jewelry. Depending on how often a local pawn broker deals with jewelry, they may or may not be able to offer competitive prices when it comes to securely storing your jewelry. 

You should keep in mind that each lender will offer unique terms for their loans and you should shop around to find the loan that best suits your needs. 

What Type of Jewelry Will They Accept? 

Jewelry store lenders tend to be most interested in pieces of jewelry that they can resell directly to a customer if you default on your loan. This may limit the types of jewelry that they will accept. Most pawn brokers deal with lower amounts of money, usually between $75-$100 per transaction, while jewelry stores may be interested in pieces of higher value.  While there are many similarities between general pawn shops and collateral jewelry lenders, there are enough differences between them that it is worth checking both options if you are looking for a collateral loan on a piece of jewelry. Contact a company like Sol's Jewelry & Loan for more information.