Azerbaijan.US
Rising global gold prices are increasingly shaping the domestic market in Azerbaijan, directly affecting pawnshops that issue loans backed by gold collateral.
Economist Khalid Kerimli says higher and more stable gold prices generally allow pawnshops to extend larger loans with lower risk. “When prices are volatile or falling, pawnshops demand more collateral. A steady rise improves coverage and makes lending easier,” he noted.
What determines the appraisal
Pawnshops assess gold jewelry using several core criteria. The most important is purity (karat/probe) – the higher the purity, the higher the valuation. Weight is also crucial, along with potential losses during melting or resale.
Importantly, pawnshops do not value gold strictly at spot market prices. Appraisals factor in operational costs, liquidity risks, and resale considerations.
Why redemption can cost more
Some customers report being asked to pay more when redeeming pledged gold. Experts say this typically happens only if the borrower violates the contract – for example, by missing payments or failing to cover interest on time.
If obligations are not met, a pawnshop may, after notifying the client, proceed to sell the item – either under the contract’s terms or by court decision. The borrower or relatives may still repurchase the item, but under the conditions of the sale process.
If all terms are met on time, customers have the right to reclaim their gold at the original pledge price.
Legal framework
Pawnshop agreements are legally binding credit contracts governed by laws on banks and non-bank credit institutions, as well as civil law. Experts advise borrowers to read contracts carefully and follow all terms. If a pawnshop acts outside the contract, customers can seek legal remedy in court.
