How diamonds can boost your finances

With many people under increasing financial pressure, alternative forms of raising cash are coming into the limelight. For both investors and consumers, diamonds are becoming a potential source of finance – find out more below.

Diamonds sales breaking records

In recent years, diamonds have increased in value – and the last few months have seen some impressive sales results. Indeed, in November 2012 a flawless deep-blue diamond took the world record for commanding the highest price per carat of any blue diamond to date. The gem, which is approximately the size of an almond, sold for 10.27 million Swiss francs (£6.73 million) to Laurence Gaff, a London-based luxury jeweller.

Another recent success story is the Archduke Joseph Diamond, which at a Sotheby's auction set a world record for a colourless diamond, being snapped up for £13.53 million.

Why are diamonds increasing in value?

Of course, you may be wondering what has sparked this upswing in the value of diamonds. Earlier this year, rough diamond producer Rio Tinto pointed towards the answer.

Indeed, the company highlighted that, in the past decade, no significant diamond finds have been made. As a result, the prices of existing diamonds are likely to be pushed up, with the firm predicting that values will rise particularly over the next decade.

How consumers can capitalise on this trend

Investors are already capitalising on this trend, but consumers can also reap the benefits. If you currently possess any diamonds, it is worth remembering they can be used to improve your financial situation – but some ways of releasing their value can be better than others.

Your immediate impulse would probably be to sell your diamonds. While this can result in a quick cash injection, there are some drawbacks to doing so – one of the key ones being if the diamonds have sentimental value, which is often case with jewellery.

However, there are alternatives to selling your diamonds. For example, instead of parting with them permanently, you can simply use them to secure a loan. The advantages of doing so include:

• Provided you repay your loan, you will be able to keep your diamonds
• You could use your diamonds to secure a second loan in the future; if the predicted trend of value increases is correct, you should be able to access a greater sum
• You will get an expert valuation

How the worth of diamonds is assessed

Of course, it is likely that not all your diamond jewellery will be suitable to take out a loan against. Typically, personal loans of this nature begin at £1,000, which means your gemstones need to be worth this amount or over – though the exact sum will vary from one lender to the next. 

There are numerous factors that impact on how much a diamond is worth. Obviously, the overall condition and quality of the item of jewellery is important, so damage such as scratches can lessen its value. 

Aside from this, there are four main criteria experts use to determine the value of your diamonds. The first of these is carat, which refers to the weight of the diamond – though it is worth remembering that a greater weight does not immediately indicate a higher quality.

Cut is another crucial factor, as this directly impacts on the brilliance of the diamond. Colour is the next point, with colourless diamonds typically being both the rarest and the most expensive. Clarity is the final factor and refers to the level of imperfections in the stone. The fewer the imperfections – and therefore the better the clarity – the greater the sum the diamond should command.