Using Jewelry As A Loan Collateral: 6 Things To Know

It’s difficult to be in a financial emergency, especially if your savings are depleted. In such circumstances, collateral loans may be one of your best options. Jewelry collateral loans, in particular, are a lifesaver. These loans are actually more beneficial than you might think, despite the fact that you could risk losing a valuable asset if you fail to pay back what you owed.

You can avail for a loan using jewelry as collateral, especially if you’re in dire need of money. Knowing what this process entails beforehand can save you from surprises and disappointments later on. So, here’s a list of things that you need to know about using jewelry as a loan collateral:

• It Won’t Affect Your Credit Score

When people think about taking a loan, some of them are worried about its negative impact on their credit score. But if you opt for a collateral jewelry loan, you have nothing to worry about. This collateral process was designed to attend to the needs of people who needs urgent cash now.

However, keep in mind that while some lenders may be more accommodating and willing to work with borrowers with low credit scores, some may still consider those with good credit ratings. Always make sure to check the lender’s website to learn more about their approval requirements.

• Interest Rates Are Lower

Compared to unsecured loans such as a bank, cash, and personal loans, jewelry collateral loans are less risky for lenders. This is because it gives the lender a guarantee that should you fail to pay back what you borrowed in time, they can use the collateral to recover their losses. And with this guarantee, lenders are more than willing to offer lower interest rates for the borrower.  

• You Can Get More Cash

The amount you can borrow from a jewelry collateral loan depends on the value of your asset. This means that you can possibly borrow more money if you have a more valuable piece of jewelry. 

Since the lender has the guarantee of the collateral, they won’t be too concerned about how they can get their money back, which is why they can afford to offer higher loan amounts. In the event that the borrower defaults, they will simply sell the jewelry to recoup what they’ve lost.

• There’s No Need To Provide Financial Information

Applying for a loan from a bank or lender usually involves a lengthy process that requires you to submit several financial documents as proof of your ability to pay back what you owe. This process can be very inconvenient and time-consuming. There’s also the risk of getting rejected once the financial institution finds out that you have bad credit or no credit history at all.

Unlike bank loans where you need to submit several documents such as proof of income, pay slips, bank statements, valid IDs, proof of address, etc., a jewelry collateral loan doesn’t any of these requirements.  As long as you have a fine piece of jewelry, you are automatically qualified for a collateral loan. 

• Determine The Value Of Your Jewelry First

The worth of your necklace, earrings, ring, bracelet, or whatever piece of jewelry you intend to use as collateral will secure the loan. 

The lenders and pawnshops themselves usually decide how much a piece of jewelry is worth. However, in order to determine its true value, it’s best to have it appraised by a professional. By doing this, you not only ensure that your jewelry is in excellent condition but also prove your ownership of it in the event that it’s misplaced or stolen.

This is an optional step, but highly recommended because it can give you an advantage, especially if you want to take a larger loan out of a single piece of jewelry. 

• Helps Build A Good Credit History

If you want to work on establishing a good credit history or if you don’t have any credit history at all, getting a jewelry collateral loan is a good way to start. This will require you to make payments in time and thus be a good borrower. As a result, your credit score will improve and it’ll open up more financial opportunities for you later on.  

Final Thoughts 

These are just a couple of important facts that you should know before opting for a jewelry collateral loan. Using jewelry as collateral is better than using your car or house, especially if you only need a small amount of money. They are easy to apply for, not to mention that they come with flexible loan terms which can be a lifesaver during times of financial difficulties.