When the bank is bare ...

Raising money in an emergency can be difficult. Last week, we discussed the options available to Hazel, who was wondering how to proceed if she wanted to dispose of a family heirloom.

A few years ago, Hazel inherited a piece of jewellery from her aunt. Single and retired, she is reasonably comfortable financially, with a company pension to supplement her state pension. She also has "adequate" savings and investments that produce an income which she uses for holidays abroad.

There are three possibilities: to consign the piece to auction; to sell it direct to a dealer, or, if she were unsure whether she really wanted to sell the brooch, but still needed cash while she made up her mind, she could borrow against the piece from a pawnbroker.

We decided on TM Sufton's, opposite London's Victoria Station, which has been described as the Harrods of pawnbrokers. We were led through a back door to Jim Tannerhill's office.

"Beautiful, beautiful, beautiful," he remarked as he looked intensely at the piece. He knew it was by Faberge and appreciated the craftsmanship. "We normally see large chunks of jewels; nothing like this. How much do you want?" We suggested pounds 5,000 and received the response, "No problem, though I will have to go through the normal formalities such as identification, and a consumer credit agreement. If you wanted more, I would need a couple of days to get a professional valuation."

Then came the crunch question, "What is the interest rate?" Sufton's tariff is 5 per cent a month for pieces under pounds 500; 3.5 per cent for advances from pounds 500 to pounds 10,000 and 3 per cent for sums above pounds 10,000, with amounts over pounds 100,000 negotiable. When asked the APR for an advance of pounds 5,000 Jim responded immediately, "46.4 per cent". As Hazel was a good credit risk, borrowing from a bank would be two-thirds cheaper for her. However, as Jim pointed out, this is not an alternative for everyone who wants immediate cash for a short period.

Certainly when he showed us around the vaults, one was in no doubt that the asset-rich but cash-poor use pawnbrokers to help their monetary liquidity. A diamond tiara lay in the inner sanctum, while close by in a locked cupboard there were jewels on which sums of up to pounds 250,000 had been advanced - rare, coloured diamonds of several carats, and an emerald the shape of a small pear and as large as a man's thumb.

I was intrigued as to what happens to items that are not redeemed. This occurs to fewer than 10 per cent of the items pledged to Sufton's. While the company accommodates individuals who have funds "on the way", when it is apparent that customers are not going to honour their side of the pledge agreement, they are advised when their treasures will be consigned to auction, which in many cases will nudge them into redeeming the pieces they have pledged. The net proceeds, after Sufton's has taken the interest it is due, are forwarded to the client.

We decided that raising cash with a pledge at a pawnbrokers was not for Hazel. However, for an individual who is really hard pressed for cash, and where a bank overdraft is not a possibility, a pawnbroker's is a viable option. The National Pawnbrokers Association has 240 members, and Paul Finch, of the association, estimates that there are around 600 pawnbrokers in the UK.

When I remarked to him that I was taken aback by the APR on advances, he made the valid point that the APR for an overdraft includes interest only and not fees for unauthorised overdrafts, charges for letters on the state of the account and the fee made every time a cheque is bounced.

Hazel's heirloom was clearly a thing that would have had the experts on the Antiques Road Show drooling. However, if you want to sell any heirloom, it is essential to do your homework first. Had Hazel not appreciated the value of the piece and known nothing about it, she could have sold it for a song to a person who also did not appreciate its true worth. So just as you shop around when buying anything, do not rush when selling. Of course, do remember that not all antiques are worth a fortunen

The National Pawnbrokers Association publishes a list of its members and a booklet on pawnbroking. Any item of value is normally suitable for pawning (which is when the loan is below pounds 50) or pledging (when it is for pounds 50 or more). Call 0171-242 1114 for more details.