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Wedding Ring as Loan Collateral

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Can we take a wedding ring as collateral on a consumer loan if we hold possession of the ring and it is for purposes other than to purchase the ring?

Well from your phrasing I'm supposing you are familiar with Reg AA. Under that reg, a wedding ring would be considered "household goods" (see 227.12(d) and (d)(4)). 227.13 prohibits a bank from taking a nonpossessory security interest in household goods other than a purchase money security interest.

Since you are holding possession of the ring, you haven't violated this provision. From a compliance standpoint, I don't know of any reason you couldn't do what you've described. Your key challenge is going to be from a standpoint of having a valid and perfected lien. I'm not an expert in this field, so I would advise checking with an attorney familiar with UCC-9 to determine if possession is enough to perfect the lien.

First published on 2/05/07

First published on 02/05/2007

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