Saving money is a challenge for most of us. However, given the rising cost of living and stagnant wages, many people have little choice but to opt for alternative financing schemes that let them borrow money in a pinch. If you’re considering taking out a loan against your jewellery, you’ll be glad to know that there are plenty of lenders willing to give you cash up front. In this post, we’ll introduce you to loan against your jewellery (also called collateralised lending or pledge financing) and explain whether it might be the right financial move for you.

How to get a loan against your jewellery?

Before delving into the details of loan against your jewellery, we’ll first take a moment to go over how to go about getting one. There are two types of jewellery loans: pledge loans and pawn loans. Pledge loans are also known as collateralised lending, and let you borrow against assets like stocks, mutual funds, or your jewellery. Meanwhile, pawn loans are short-term, secured loans where you pledge an item, like a piece of jewellery, as collateral. If you’re interested in a loan against your jewellery, you’ll need to check whether your lender offers both pledge and pawn loans. If you only want to borrow against your jewellery, you can skip the pawn loan option.

Pros of Loan Against Your Jewellery

Jewellery is an easy choice as collateral: It’s portable and easy to resell. Jewellers routinely check the quality of their wares using special equipment that can identify defects that are invisible to the naked eye. You can use these devices to get an accurate appraisal of your jewellery’s value. Jewellery also has an intrinsic value that other types of collateral lack. This means that a lender is less likely to liquidate your jewellery (sell it off) prematurely. It also means that you’re less likely to see your jewellery vanish from your grasp as collateral.

Cons of Loan Against Your Jewellery

If you take out a loan against your jewellery, you’ll have less jewellery in the future. If you rely on your jewellery as an emergency fund, this could pose a problem. Jewellery is an illiquid asset: It’s difficult to sell quickly and at a favourable price. This means that if you need to repay your loan early—maybe you lost your job and have no way of making your payments—you’ll have to sell your jewellery at a discount. Oftentimes, this means taking a huge loss. Taking out a loan against your jewellery is risky: If you default on your payments, the lender can repossess your jewellery. You may not be able to buy it back, even if you’re able to repay the loan in full.

The Bottom Line

Loans against your jewellery, also known as pledge financing, are a quick and easy way to get cash for any number of financial needs, from paying off high-interest credit card debt to funding a new business venture.