How Does a Collateral Loan Work?

June 27, 2021
David

How Does a Collateral Loan Work?

Collateral is property given to a lender in exchange for the money they loan you for your personal items. Collateral loans often come with faster approval and more flexible terms than unsecured loans—those without any collateral to borrow against. Home mortgages and car loans are common examples of collateral loans.

If you’re wondering what you have that’s valuable enough to borrow money against and you’re not willing to put your house, car, or business up for collateral, look no further than your jewelry box. With a collateral loan on your jewelry or your luxury watch from Green Hills Jewelry and Loan, you could walk away with the cash you need the same day you’re approved by bringing in your loose diamonds, luxury watches, gold, or silver.

Use Jewelry as Collateral

If you use jewelry as collateral for your loan, you give the lender an asset they can sell if you don’t pay back the money owed according to the terms agreed upon. You can borrow against jewelry if you’re staring down a financial hardship or unexpected expense. A jewelry collateral loan often means quicker cash and better terms, so you can lighten whatever financial load you’re carrying.

If you’re facing a burdensome emergency medical debt, need money for a car or home repair, or have been laid off, you likely need money quickly. With a collateral loan—often called a secured loan—you can get money quicker than if you were to apply for an unsecured loan. An unsecured loan is more dependent on your credit score and past credit history and, therefore, may not be an option for people with poor or no credit.

It can also take weeks to secure the cash you need immediately after the application process, credit check, and necessary approvals. In addition, unsecured loans usually come with higher interest rates and more stringent terms. This is because the lender is taking more of a risk on you and your ability to pay back the loan and doesn’t have any property to sell if the money is not paid back.

What can be used as collateral for an asset-based loan? Almost anything with value. Commonly your home, vehicle, savings account, investment portfolio, insurance policies, business inventory, and other valuable assets like jewelry.

The value of these assets is determined in part by looking at the recent sales prices of similar items. This tells the lender how much they can expect to sell the item for if the loan is not repaid and they need to recoup their money.

Why Choose a Collateral Loan?

Situations in which you may want to consider applying for a collateral loan by borrowing against your high-value jewelry assets are after a medical emergency or being laid off from your job. In these cases, you need fast cash. If you don’t have credit cards, you won’t be able to get a cash advance, and other loans take weeks and come with higher interest rates. A collateral loan may well be your best or only option.

Secured loans like those that use jewelry as collateral can help you build credit or work towards restoring damaged credit. The expert jewelers and gemologists at Green Hills Jewelry and Loan put their decades of experience into providing you with a free, confidential appraisal of your jewelry and loose diamonds, including colored diamonds and luxury watches.

Collateral loans can secure you the money you need that you might otherwise not be able to get on an unsecured loan without a cosigner. In addition, getting a loan for your jewelry instead of selling it means there won’t be implications on your reported income for tax purposes. Even better, you will get to hold onto your jewelry or other collateral and won’t need to part with it permanently as long as you repay the loan.

Unsecured loans may be harder to get for someone with poor credit or no credit because the approval is in large part based on the lender’s confidence in your ability to repay the loan. All the lender has to go on in their approval decision is your current income and your history of repaying loans. If you have never taken out a loan—or failed to repay a loan in the past—some lenders may not give you another chance.

Collateral loans can usually secure you more money than loans where you don’t offer up any collateral because you are offering something of real value. Green Hills Jewelry and Loan does not do credit checks so you can walk right out the door with cash in your hand the same day. There is less of a chance of a major loss to the lender this way because they have something that can make up for the money they loaned you in the event they don’t get paid back.

The lender may not be willing to take a risk by loaning you money at all or may only do so with terms that include a high-interest rate, which could make the payments unaffordable for you, thereby increasing your debt in the end. This makes a collateral loan—or asset-based loan—a smarter choice for your needs.

What Kind of Jewelry Can You Borrow Against?

At Green Hills Jewelry and Loan in Nashville, Tennessee, we loan on high-value fine jewelry of any type, including designer pieces by Tiffany & Co., Cartier, and Harry Winston. You can also bring us your certified or non-certified loose diamonds of 0.50ct or larger. We’ve given loans on gold and silver, coins, and luxury watches from Rolex, Breitling, Omega, and more.

Unlike other lenders, Green Hills Jewelry and Loan has access to an international network, meaning that we can appraise your item’s value in the global market, giving us the ability to pay top dollar for your jewelry and likely offer a higher loan amount than other lenders. We are dedicated jewelry lenders that specialize in these types of loans.

How to Get a Collateral Loan with Jewelry

You can use your jewelry collateral to compare several lenders and find the terms that work best for your current financial situation. Terms will include loan length, the appraisal value of the collateral, the total loan amount, and the interest rate. The lender will offer you a percentage of your jewelry’s value using a loan-to-value ratio of a certain percentage of the item’s monetary worth.

Make sure you understand the terms of the loan before agreeing to it. Find out what will happen if you fail to repay the loan. Some lenders will default your loan and seize your collateral after the loan period if you fail to repay. Some offer a grace period for repayment, and some are willing to negotiate if you communicate honestly with them.

The loan terms will dictate how you will receive possession of your jewelry once the loan is paid back in full. Familiarize yourself with these terms before taking any money. You can also compare the collateral loan rates and terms with multiple lenders.

Green Hills Jewelry and Loan administers personalized asset-based collateral loans for cash. You will walk away from our loan process not only with cash in hand but with a greater understanding of how we value the jewelry, diamonds, luxury watches, gold and silver, and coins used as collateral.

How Do You Know What Your Jewelry Is Worth?

You may not have adequate information on your jewelry to determine its value. If you purchased it yourself, you will know what you paid for it. But what if the piece of jewelry you’re considering using for collateral was a gift or is an inherited heirloom?

At Green Hills Jewelry and Loan, we can check the items for hallmarks, test their weight, and check other factors to get an idea of their authenticity. The best way to determine the value of your piece is to have an expert examine it. You will receive a percentage of the jewelry’s value as a loan if approved, with different lenders offering different amounts, repayment lengths, and interest rates.

Collateral loans are an attractive alternative to other types of loans and can use the equity of your jewelry. You won’t need to part with the jewelry you may have an emotional attachment to. The biggest risk in collateral loans is losing your items permanently if you don’t repay the loan.

At Green Hills Jewelry and Loan, a qualified expert will appraise your jewelry and give you the money you need to pay unexpected expenses. We loan on designer pieces by Tiffany & Co. and Harry Winston or high-value fine jewelry of any type.

Don’t face unexpected expenses alone. If you’re in a tough spot in Nashville, TN, contact Green Hills Jewelry and Loan at (615) 972-9125 or stop and see us at 2120 Crestmoor Rd. #3010B with your jewelry for a free, confidential appraisal.

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