How Loans Against Jewellery and Watches Work

What an asset-backed loan is

An asset-backed loan uses something you own as security for credit. With jewellery and watches, the item is usually handed over and held by the credit provider for the duration of the loan. You generally remain the owner of the item while it is held as security, provided you keep to the terms of the agreement. When you have repaid the loan, interest and fees as agreed, the item is returned to you.

Because this is credit, it is regulated by the National Credit Act. Credit providers must be registered with the National Credit Regulator, must conduct an affordability assessment and must give you a pre-agreement statement and quotation setting out the costs before you commit. The credit agreement then sets out the interest, fees and charges, repayment, your early settlement rights, the steps that apply on default, how the item may be disposed of and how to complain.

Knox Precious Metals (Pty) Ltd is a registered credit provider, NCR registration number NCRCP21466.

An asset-backed loan suits some people and not others. It is not necessarily cheaper than other forms of credit, and comparing it with alternatives, including selling, depends on your circumstances.

Which items qualify

Not every item qualifies. Credit providers usually look for items with a reliable resale market and a value that can be established with confidence. For jewellery, that generally means gold, silver or platinum pieces whose metal content can be tested. For watches, it generally means well-known brands with an active resale market.

Knox considers loans against items made of gold, silver and diamonds, and against luxury high-end watches and handbags. Examples include gold and silver coins or bars, gold and silver jewellery, cutlery and trophies, watches from brands such as Rolex, Cartier and Patek Philippe, and bags from brands such as Chanel, Louis Vuitton and Hermès.

Watch loans are not offered by every provider, and the position can change over time. Knox accepts luxury high-end watches, from brands such as Rolex, Cartier and Patek Philippe, for loan assessment.

You will also need to show that you own the item and are entitled to offer it as security, and you will need to meet the identity and affordability requirements that apply to credit. Items owned jointly, held in trust or belonging to someone else need particular care and may not qualify.

Bring your ID, proof of address (dated within the last 3 months), the bank details for the account the loan should be paid into and for the debit order, and any certificates, invoices or papers for the item. If you are married in community of property, your spouse must consent to the loan.

How the assessment works

The assessment establishes what the item is and what it could realistically be sold for. It is not the same as an insurance valuation or a retail appraisal, and the figures can differ considerably.

Jewellery

For jewellery, the assessment usually looks at the metal type, purity and weight, often using XRF testing, together with condition and any maker's marks. XRF reads surface metal composition only and does not identify or grade gemstones. Stones may be valued separately or not counted at all, depending on the provider's policy and whether they can be graded.

Watches

For watches, the assessment considers brand, reference, authenticity, condition, service history, box and papers, resale demand, ownership evidence and market liquidity, never just the original retail price. A watch without papers, with replaced parts or with a long gap in its service history may be assessed lower or may not qualify.

Knox works with trusted partners in the watch profession, who value and assess watches on Knox's behalf, considering metal content, condition and resale demand. Knox itself is not an authorised brand service centre and does not issue brand authentication.

How the loan value is set

The loan value is a portion of the item's assessed realisable value, not its retail price or its insurance value. A credit provider lends below resale value to allow for price movements, the cost of holding the item and the cost of selling it if the loan is not repaid. For gold jewellery, the metal price at the time of assessment also matters.

The loan-to-value Knox applies depends on the item: up to 75% of the assessed value for gold, 60% for silver and 50% for watches and handbags.

The amount offered is a maximum, not a target. You can usually ask for less, and borrowing only what you need keeps interest and fees down. The amount must also pass the affordability assessment required by law.

Knox assesses the asset offered as security together with the checks required by the National Credit Act.

Interest, fees and the pre-agreement quotation

Before you sign, you should receive a pre-agreement statement and quotation. Read it carefully, because it gives the clearest picture of what the loan will cost. It typically shows:

• the loan amount, also called the principal
• the interest rate and how interest is calculated
• any initiation fee and monthly service fee
• any other charges permitted under the agreement
• the total amount repayable and the repayment dates

The National Credit Act and its regulations limit the interest and fees a credit provider may charge, and a provider may not charge fees the Act does not allow. Compare the total cost of credit rather than the interest rate alone, and make sure you understand how the cost changes if you pay late or extend the loan.

Interest is charged at the fixed rate shown in your quotation, calculated daily and charged monthly. The quote also shows an initiation fee and a monthly service fee. Knox charges interest of 5% per month on a client's first loan. On later loans the rate ranges from 3% to 5% per month, depending on the loan.

Loan term, storage and insurance

The term is the period over which the loan runs. Loans against jewellery are often short-term, and the agreement states the term, the repayment date and whether an extension is possible. Do not assume an extension will be available; ask before you sign.

Knox loans run for a term of 1, 2 or 3 months.

While the loan runs, the item is held in the provider's custody. A careful provider records the item at intake, typically with a description, photographs and a condition note, and stores it so that it can be identified as yours. Ask how the item is recorded, where it is held and who can access it.

Ask, too, how the item is insured while it is held, what the limits and exclusions are, and on which value any cover is based. Your own household insurance may treat items differently once they leave your home, so tell your insurer or broker.

The box insurance covers items of intrinsic value such as jewellery, coins, bank notes, securities and certificates, but cash is covered only up to the amount in the policy schedule. Insurance for items held in safe custody outside a safe deposit box (such as art, trunks and large items) works differently: it is based on the potential value of each item, so Knox confirms the cover for your items before intake.

Repayment and early settlement

Repayment works according to the agreement. Some loans are repaid in a single amount at the end of the term, others in instalments. Pay on time, keep proof of every payment and ask for a statement if anything is unclear.

Under the National Credit Act, consumers have a right to settle a credit agreement early. The settlement amount generally includes the outstanding balance and the interest and permitted fees up to the settlement date, and the agreement explains how it is calculated. Ask for a written settlement figure before you pay.

You can settle early at any time without penalty. Ask Knox for a settlement figure, which is valid for 24 hours; you can also make extra payments at any time without notice.

If you cannot repay: default

If you think you may struggle to repay, contact the credit provider early. Depending on the agreement, it may be possible to discuss an extension or a revised arrangement, although the provider is not obliged to agree.

Specific rules under the National Credit Act apply to default and to the realisation of security. In general, a credit provider must follow the steps set out in the Act and in the agreement before enforcing it. The agreement explains when the item may be sold, how the proceeds are applied to what you owe, and what happens to any surplus or shortfall.

If a payment is missed, Knox sends a written default notice giving you time to pay. If the arrears are not paid within that period, the loan ends and Knox may sell the pledged goods without a court order. The proceeds settle what you owe: any surplus is paid back to you, and you are not liable for any shortfall. Default interest is charged at the same rate as the loan.

If you believe the agreement has not been followed, use the provider's complaints process first. You can also approach the National Credit Regulator, or an ombud scheme with jurisdiction over the provider, such as the National Financial Ombud Scheme. If you are struggling with debt more generally, a registered debt counsellor can explain your options.

Complaints can be sent in writing to compliance@knoxvault.co.za or raised by calling 011 646 1919, and Knox asks that you contact it first so it can try to resolve the matter.

Getting your exact item back

With a properly structured loan against jewellery or a watch, the specific item you handed over is the item you get back, not an equivalent piece. This is one of the main differences between borrowing against an item and selling it, so make sure the agreement and your intake record identify the exact item clearly.

When you settle the loan, you will usually need to identify yourself before the item is released. Check the item against the intake description and photographs before you leave, and raise any concern at the time. If someone else will collect on your behalf, ask in advance what authority they need.

Yes. Pledged items are stored separately from other goods and the same item is returned to you, in the condition in which it was held, once the settlement amount is paid. You must present your barcode receipt, proof of identity and your signature.

Borrowing or selling

Some people borrow against an item because they want to keep it, while others sell because they no longer need it or prefer not to take on credit. Neither choice is right for everyone. Borrowing adds interest and fees and means the item may be sold if you cannot repay, while selling is final and gives up the item for good. Think realistically about your ability to repay on time, and if you are unsure, speak to an independent financial adviser or a registered debt counsellor before you decide.

Questions to ask before you sign

Ask these questions, and make sure the answers are reflected in the quotation and agreement:

• Does this item qualify, and if not, why not?
• Are watches currently accepted for loan assessment?
• What was the item assessed at, and on what basis?
• What is the proposed loan amount, and can I borrow less?
• What are the interest rate, initiation fee, monthly service fee and total amount repayable?
• What is the term, and is an extension possible?
• How is the item recorded, stored and insured while you hold it?
• How do I repay, and how is an early settlement amount calculated?
• What happens, step by step, if I miss a payment?
• Will I get the exact same item back, and what do I need to collect it?
• What are your credit provider registration details, and how do I complain?

Key takeaways

• A loan against jewellery or a watch is secured credit regulated by the National Credit Act.
• The loan value is based on the item's assessed realisable value, not its retail price or insurance value.
• The pre-agreement quotation sets out the interest, fees and total amount repayable before you commit.
• You have a right to settle early, and the agreement explains how the settlement amount is calculated.
• If you cannot repay, the agreement and the Act set out the steps that apply, which may include sale of the item.
• On settlement you should receive the exact item you pledged, checked against its intake record.