Loans on Diamonds
All of the loans we make are collateralized by diamonds.  It is the only type of loan we make.  That means that you as the customer must  tender to us a diamond or piece of diamond jewelry as collateral on the loan.  Since most of our customers are individuals needing or wanting to borrow for various reasons, the diamonds tendered are usually mounted in rings, pendants, earrings or bracelets.

In other words, we take as collateral the diamond jewelry that ordinary people own for the usual reasons of engagement, wedding and adornment, and enable them to borrow money based on the value of that jewely in secondary markets.  The amount of the loan is based solely on the value of the diamond jewelry.

Persons wishing to obtain a loan may tender their diamond(s) either in person or by mail (although most do so in person).  Diamonds may be either mounted or loose.  Mounted diamonds are never unmounted unless the customer so requests.  Diamonds are tested with thermal and moissanite testers; measured and weighed (if loose); checked for lasering and fracture filling; graded for color, clarity and cut; and then assigned a loan value based on the Rapaport Diamond Report.

In most cases, we consider the reasons you want to borrow money your own private business.  We usually do not ask but reserve the right to do so if the situation warrants it.

All diamonds tendered as collateral must be owned free and clear of any encumbrance by the person applying for the loan.  The appllicant will be asked to sign an affadavit certifying that they are so owned.  We will accept no diamonds as collateral which are in the applicant's possession by virtue of loan or memo from another firm or the purchase of which is still being financed by a retail store.

You may click on any of the topics below for more information:



LOAN VALUES

We set loan values equal to 80% of what we think the collateral will sell for at auction.  This is also comparable to what they would sell for in interdealer markets.  The reason for setting loan values at this level is that, in the event of a default on a loan, the fastest and easiest way for us to recover what we have loaned out is to sell the collateral either at auction or to another dealer.  Generally, this means that loan values are set at 40% of the Rapaport Diamond Report list price (60 back) on diamonds over 1/2 carat; 35% on diamonds from 3/8 to 1/2 carat; and 30% on diamonds 1/3 carat or less.  Adjustments are made to these values as the cut characteristics dictate.


INTEREST RATES AND FEES

We operate as a Chapter 56 Regulated Lender under Minnesota state law.  As such, the interest rates we charge are established in state law.  They are: 33% per year on the first $1050 loaned and 19% on any amount above that.  The effective rate is therefore a weighted average of those two rates.  The effective rate decreases as the the loan amount increases above $1050.  It bottoms out at 21.75% per year.  There is also a nonrefundable $25 fee for making the loan on all loans up to $4320.

It is important to emphasize that these rates are per year.  The only other place where a loan can be obtained upon the tender of a diamond is a pawn shop, which will quote rates per month.  Our interest rates are roughly 1/12th the rates charged by pawn shops.


NO CREDIT CHECKS

We do not check the credit records of customers, nor do we report to any credit bureau.  Our decision to make the loan and the size of the loan is based mostly on the value of the collateral.  We may ask for proof of ownership in certain cases, and we reserve the right to decline in any case where we suspect the applicant is not the owner of the collateral.


SAME DAY LOANS

Loans are completed and checks are issued on the same day collateral is tendered if done so in person.  The process usually takes about an hour but can take longer if there are multiple pieces or diamonds to appraise.  When the collateral is tendered by mail, a loan contract is mailed along with the check on the day the collateral is received.  The customer signs the contract when he receives it in the mail and returns it to us.


SECURE STORAGE OF COLLATERAL

At the time we take possession of the diamond collateral, it is sealed in a coin envelope in the presence of the customer; the customer then signs or initials across the seals of the envelope; and we then tape over the initials or signature.  By following this procedure, the customer is able to see when he or she comes back to redeem the collateral that it has not been tampered with.

All diamonds are then stored for safekeeping in a safe deposit vault in the US Bank in downtown Minneapolis.  No diamonds are stored in our office.  Your diamonds are safer with us than in your own home.


MONTHLY PAYMENTS AND LENGTH OF LOANS

We make loans for any period of time up to five years in length.  The term chosen is determined by the size of the loan and the monthly payment the customer is comfortable with.  The monthly payments required will pay the loan in full in whatever period of time is chosen.  There is no penalty for prepayment.  The loan may be paid off whenever the customer wants to pay off and can afford to do so, and he or she will be charged the simple interest for only the exact number of days for which the money was borrowed.  Monthly payments may be made in person at our office in Minneapolis or by mail for small loans.  Payments for large loans are required to be made by ACH automatic payment.


HOW BIG DOES A DIAMOND NEED TO BE

This is a difficult question to answer.  Some 1/4 carat diamonds will collateralize our smallest loan (which is $100) and some do not.  However, we frequently take in as collateral cluster-style rings and diamond line bracelets with many diamonds smaller than 1/4 carat which will collateralize loans of hundreds and even thousands of dollars.  Please call us and let us know what you have.


WHY THIS IS BETTER THAN A PAWN

Our most direct competitors are the pawn shops.  The pawn shops are the only other place where you can obtain a loan by tendering a diamond as collateral.  But, as a regulated lender, our loan program is much cheaper for the customer than is a pawn.  The regulated interest rates we charge are roughly 1/12th of what you will pay at a pawn shop.  We also give you much longer periods of time to pay back your loan.  Generally, we offer you more money than the pawn shops will.  And, finally, you have the assurance of knowing that, as a regulated lender, we are audited and examined by the Minnesota Department of Commerce at least once every two years for compliance with the consumer protection provisions of the Minnesota Regulated Lenders Act.  We pass these audits with flying colors.


REGULATED LENDER

We operate as a Chapter 56 Regulated Lender under Minnesota state law.  That means that the maximum fee and interest rates we are allowed to charege are set by state law.  It also means that we are audited and examined by the Minnesota Department of Commerce at least once every two years for compliance with the consumer protections of the Minnesota Regulated Lenders Act.  Please feel free to call the Financial Examinations Division of the Department of Commerce at (651) 296-4026 if you have questions for our regulators about our company.


BY APPOINTMENT PLEASE

We do ask that you call us to make an appointment if you would like to come in for a loan or to buy a diamond.  We can almost always accomodate you on the same day, especially if you call early in the day.  We would hate to see you come in without an appointment and have to wait a long time or come back another time because we are busy with other customers.  Please call us at (612) 333-6726.