When you first think of pawning jewelry or pawn shops, you may think of the TV show “Pawn Stars,” or maybe even a Quentin Tarantino film. However, pawn shops aren’t just an American practice, although more than 30 million Americans use pawn shops yearly. The practice of pawning has been around for centuries, dating back to ancient China. Today, it’s a $14.5 billion industry with 11,000+ pawnbrokers across the U.S.
While pawning jewelry or other valuables might seem like a great way to get quick cash, educating yourself on the industry, the process, and its setbacks is essential. Here are some reasons why avoiding pawn shops might be in your best interest and some alternative options to get cash for your jewelry.
What Are Pawn Shops, And How Do They Work?
A pawn shop (also called a pawnbroker) is a business that loans money to people who bring in valuable items, which they then leave with the pawn shop. The valuables left behind are known as “collateral,” meaning security for the loan provided by the pawn shop. The person can get their valuable item(s) back from the pawn shop if they pay back the money the pawn shop loaned them with interest. However, suppose the person doesn’t repay the loan and interest within an agreed-upon timeline. In that case, the pawnbroker can sell the valuable item to another customer to get back the money the pawn shop loaned.
How Do Pawn Shops Make Money?
Pawn shops make money in two ways: (1) making personal loans and (2) selling unclaimed collateral items.
Providing Personal Loans
Pawn shops give out personal loans to individuals who relinquish custody of an item, such as jewelry or electronics. The amount a pawn shop is willing to lend is based on a few different factors: the value of the item, the pawnshop’s inventory at the time of the loan, and demand for the item. Since individuals seeking a pawn loan typically can’t qualify for a traditional bank loan, the risk of default is higher. That’s why pawn shops make loans with substantially higher interest rates than banks typically charge for personal loans. State law governs the amount of interest a pawn shop is allowed to charge. In Texas, the maximum pawn shop rate is 240% APR! That’s high!
Reselling
Pawn shops’ second primary income source is retail sales on unclaimed merchandise and items purchased outright from individuals.
How Much Will Pawn Shops Give For Your Jewelry?
If you are considering pawning jewelry, you might wonder how much pawn shops offer. Unfortunately, selling your jewelry to pawn shops guarantees the lowest amount of money in exchange for your items, thanks to the business model we outlined above. While pawn shops tend to offer more money to purchase items outright than to lend against them, it still will only get you about 50% of the value of your jewelry.Even if you need cash in a pinch, there are more lucrative ways to sell and get more out of the value of your jewelry.
Alternatives to Pawning Jewelry
If you want more money out of your jewelry, there are better ways! It also makes sense to outright sell jewelry you no longer want or need, rather than taking out a loan with a pawn shop. Those interest rates are no joke, especially in Texas! Here are some other, more lucrative, ways to sell your jewelry:
Selling Online
While this isn’t a great option if you need cash on the spot, you can sell your jewelry online to get more value out of your jewels. eBay is a great, safe option for everyday sellers. If you end up needing to do an in-person transaction, here are some do’s and don’ts to ensure your safety:
- DON’T agree to meet strangers alone.
- DON’T give out your address.
- DO meet in a safe, public place.
- DO accept cash only.
Dallas Gold & Silver Exchange
We’ve been around since the 1960s. We’ve stood the test of time by offering customers the most for their jewelry and being a trustworthy source of information. If you don’t believe us, shop around before you come to see us! We’ll give you the best offer and the best experience with our friendly, knowledgeable associates. You can bring your jewelry to any of our metroplex locations during our business hours at your convenience. No appointment is necessary.
Want to learn more about the selling process at Dallas Gold & Silver Exchange? Let Loreina walk you through the easy process by clicking the video below!
FAQs
Experts recommend against pawning expensive gold and diamond jewelry because the unpromising cost-to-benefit ratio doesn't make financial sense. To get your jewelry back from the pawn shop, you must return the borrowed money and interest fee before the deadline.
Why should you avoid pawn shops? ›
Limited funds: Pawn shop loans are typically fairly small. If you need access to a large amount of money, these loans may not be a fit. High cost of borrowing: The interest rates on pawn shop loans can be much higher than other forms of financing, such as personal loans.
What happens when you pawn jewelry? ›
The pawn shop owner agrees to hold your item for a specific period of time, and you agree to pay back the loan, before that period ends. As the U.S. Department of the Treasury notes, as a pawn customer you may choose to redeem the loan, which means repaying the loan amount along with interest and any fees.
Should I sell my jewelry to a pawn shop or a jeweler? ›
For pricing and appraisals, selling to jewelry stores is better than pawn shops. Pawn shops have high overhead costs and typically resell items at a lower price. Jewelry stores have in-house master jewelers who can provide accurate appraisals and higher prices for your jewelry.
Do pawn shops rip you off on jewelry? ›
Pawnshops rip you off by under-valuing your items
This is one of the biggest misconceptions about pawnshops. Pawnshops base loan offers on re-sale value, not retail price. This difference is most easily exposed with jewelry.
What jewelry is best to pawn? ›
Precious metals are a fantastic item to pawn in any form. Gold, silver, and platinum are always in high demand and can snag you a hefty payout, especially if you decide to pawn or sell at Precious Metals Refinery. Like precious metals, diamonds are one item that seems to never go out of fashion or drop in desirability.
What's the most a pawn shop will pay? ›
Most pawn shops offer loan amounts of 25% to 60% of your collateral's value.
How much is a 10K white gold ring worth at a pawn shop? ›
A 10K gold ring is worth $38.73 or less at a pawn shop. Most pawn shops only offer between 40% and 60% of your gold ring's value but that is too less money. Without a doubt, Jewelry is a prime candidate for price negotiation, because it's expensive and the margins are fat.
Can I sell a diamond ring I found? ›
Yes, you can sell a diamond you found as long as it was found on your own property or in a public area that allows for the collection of minerals. However, if the diamond was found on someone else's property, you may need to obtain permission before selling it.
What type of jewelry is best to sell? ›
What type of jewelry is best to sell? If you think you will wear and enjoy the jewelry, do not sell it unless you need the cash! But sometimes it is best to sell your jewelry. In that case, you can get money for any jewelry that is silver, sterling silver, gold (whether white, yellow, or rose gold) and platinum.
However, the vast majority of fine jewelry will receive an offer that is between 20% and 50% of its original price. If it's your first time reselling luxury jewelry, this price range may come as a surprise.
Why do pawn shops pay so little for gold? ›
It's important to note that no pawn shop will pay the market price for gold. Pawn shops need to make a profit in order to stay in business, meaning you'll never be offered the exact spot price for gold jewelry. Instead, you'll usually be offered a significantly lower amount than the market price.
Should I buy a gold necklace at a pawn shop? ›
It's authentic
Many people are apprehensive to buy gold or other expensive things such as gold from a pawnshop because they are concerned about the quality and authenticity. However, pawnshops authenticate all gold jewelry pieces that they buy and sell.
What does pawning jewelry mean? ›
To pawn something is to use it as collateral when you're borrowing money. When you pawn a necklace at a pawn shop, you get cash in exchange for it with the understanding that you can buy it back later.
Is it OK to buy from pawn shops? ›
Pawnbrokers and similar businesses provide a legitimate service, however they often obtain their merchandise from unregulated or unknown sources. This can provide an opportunity for criminals to dispose of stolen items by converting them to cash. In turn, customers may be unknowingly purchasing stolen goods.
