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Pawn Shop or Luxury Lender: Where's the Best Place to Secure a Loan?

If you're looking to borrow money without going through the bank, you might be thinking of putting your jewelry, firearms, or other valuables up for collateral to secure a loan from a lender. However, not all lenders are created equally, and where you choose to borrow and what you choose to use as collateral will make a big difference on how much money you can borrow and what the loan terms will be. Here are the pros and cons of typical lending establishments so you can make the loan choice that is best for you.

1. Pawn Shops

Pawn shops are a great asset to a community because they offer quick money for valuables or quick cash in a time of emergency while providing a place to safely sell jewelry, guns, electronics, and other high-priced items. They are a great choice for your collateral loan if

  • you are not sure what your item is worth. Some older pieces of jewelry might be of questionable quality or may not be in the best condition. A pawn shop will assess your item based on its resell value to their business. If you are not sure how to price your item on the market or if it even qualifies as collateral, a pawn shop is a great place to start. If it is not worth giving you loan, but it is worth selling, the pawn shop is more likely to be flexible.
  • your item is not brand name. Some jewelry items, electronics, watches, and furniture are worth more because of their brand. Those who shop at pawn shops care about brands, but not so much so that they will pass over an item of value because it is not from a high-end manufacturer.You might get less for your item, but pawn shops have a wider range of customers, so some lower-end items still have value to the shop in general. 
  • your item is unconventional (like a lawn mower or a musical instrument). Because pawn shops deal with a wide variety of goods, you will have better luck securing a loan for an asset that is not as mainstream as gold or diamonds. 

The downside of pawn shops is that offering you a loan is risky on their part, so they will not typically give you the full value of the item in cash—if you default on the loan, they will make very little, if any, profit. Therefore, you will only get a portion of what the item is worth for your loan. If your item was not very valuable to begin with, this doesn't leave you with as much as you might have hoped. 

2. Luxury Lenders

Luxury lenders operate similarly to pawn shops, but they deal almost exclusively with designer jewelry, gold, watches, and other items of a similar nature—even luxury wines. Luxury lenders have consumers who are looking for good brands at affordable prices. If you have designer pieces or high-ticket items that are worth thousands of dollars, you are going to be better off taking your assets to a luxury lender for a loan instead of a typical pawn shop, since they will be better equipped to appraise and resell your higher-priced items. Because of their narrower expertise, you can often get a better loan amount and longer term lengths with a luxury lender, and you have the benefit of your transaction being confidential.

Collateral loans are one of the easiest ways to get cash in a tight spot. However, depending on the type of asset you want to borrow against, you need to choose the correct lender for the task. Speak with a representative from an establishment like Sol's Jewelry & Loan to learn more.