"Forget the Dickensian image of a shabby old man hoarding gold in a back alley. Today's pawnbroker is a visible presence on nearly every British high street, and he's doing very nicely, thank you.
The number of pawn shops in the UK has nearly trebled in the past seven years, with listed companies such as Albemarle & Bond and H & T posting huge profits in recent weeks.
"More middle-class people have been attracted to pawnbrokers because of the credit crunch," says Des Milligan, head of the National Pawnbrokers Association (NPA). He added that the industry was fast shaking off its stigma: "The modern pawnbroker is a cross between a jewellery shop and a building society."
But is it ever a good idea to go to a pawnbroker, and what can you expect if you do? The attraction of the pawn shop is ready money with no questions asked, but you'll find yourself paying high interest rates, and could find yourself losing your valued items.
Frances Walker, of the Consumer Credit Counselling Service (CCCS), says that when the service deals with clients who are heavily in debt, it treats pawn shop debts as a priority "particularly when the item that is pawned has high sentimental value, such as your mother's wedding ring".
"It's not particularly desirable, but we do understand why people do it," she says. "It's not the worst way of getting cash. If you do it, you need to understand the rules and regulations, and make sure that the broker you go to is a member of the National Pawnbrokers Association."
There are even circumstances where a pawn shop could be a sensible financial decision. For example, if you are about to breach your bank overdraft, pawning an item to ensure that you do not go into debt with your bank could be cheaper than yet more bank charges.
The rates are often cheaper than those of comparable payday loan companies, and while pawnbrokers' interest rates look expensive, if you are genuinely only going to need the money for a couple of weeks, it can work out as a reasonable deal.
For example, if you had a luxury watch to pawn you could end up with £515 cash, which you would pay back at around eight per cent monthly interest. That's a high annual purchase rate, but if you're going to pay it back after a month you'll pay less than £50 – cheaper than going into an unauthorised overdraft.
The other advantage of a pawn shop is that it does not require credit checks that will show up on your credit file. If you are already struggling to get a credit card, more credit searches will damage your rating and make it even more difficult, but the pawn shop is a discreet place to raise finance.
To make pawning a viable borrowing activity, you need to have the right sort of item to pawn. The current high value of gold makes old jewellery a popular choice for this. The online pawnshop borro.com will lend up to 40 per cent of the second-hand value of an item. (AtW's comment: so that's like if second hand value is 50% then you get 40% of that or 20% of the original value) It lends against watches, loose diamonds (even if they've fallen out of your engagement ring), gold coins and bullion, art and antiques.
Paul Aitken, its chief executive and founder, says the average amount that the company lends is just over £1,000 – compared with smaller loans of £100 on the high street. Customers tend to be self-employed.
"They invest in things like art and antiques in the boom times (AtW's comment: oh FFS - investing into antiques and then having to pawn them?
), but we've had a couple of bad years, as you know," he says. "These people know that they need to pay salaries and if they have to sell an item quickly, they won't get a good price for it." Borro.com has lent money against luxury cars, and even planes. Ninety per cent of its pledges are redeemed.
If you do go to a pawnbroker, make sure you get a proper agreement. Pawning is a simple form of finance, but you need to know how long a broker will hold your item before they would sell it on (usually six months), whether you will be repaid the value of your item if it is stolen, and the interest rate you are paying. Pawnbroking is a regulated activity.
If you can't afford to repay your debt, and you borrowed £75 or less, the pawnbroker will keep your pawn. For loans worth more than £75, the pawnbroker can sell the pawn to recover the debt. Until it is sold you can still redeem it by paying what you owe, including the interest that has built up. If you cannot pay what you owe by the deadline, the pawnbroker may keep or sell the item.
You may be able to renew the agreement, but if the broker decides to sell the pawn to recover the debt, you may still have to pay the difference if the sale doesn't cover it (although in practice most pawnbrokers won't chase you).
If the sale makes more than the loan amount, the pawnbroker must hand over any surplus, but you don't automatically receive that cash. (AtW's comment: so they MUST return it but you don't get it automatically?!?!
) If your item is sold, it's always worth following up with the pawnbroker to check you're not out of pocket. Make sure you don't lose your receipt, as this is your proof that you own your item.
Before you go to a pawnbroker, however, consider cheaper and less risky alternatives. If the item you would pawn has no great sentimental value, consider what you would get for it by selling it on eBay or elsewhere instead, especially if it is easy to value. If you have a good credit rating, a 0 per cent introductory offer on a credit card is a better form of short-term debt. If you can negotiate some headroom with your bank, that will be cheaper, too.
Mr Aitken, at borro.com, does not recommend a pawnbroker for those who need money over the longer term. "It's really for people who want money quickly for a few months. It's good for cashflow problems such as buying school uniforms or even school fees."
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Source: Pawnbrokers: middle classes flock to cash in their valuables - Telegraph
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Final thoughts: so there you have it, at the start of new century British Middle class is pawned...
The number of pawn shops in the UK has nearly trebled in the past seven years, with listed companies such as Albemarle & Bond and H & T posting huge profits in recent weeks.
"More middle-class people have been attracted to pawnbrokers because of the credit crunch," says Des Milligan, head of the National Pawnbrokers Association (NPA). He added that the industry was fast shaking off its stigma: "The modern pawnbroker is a cross between a jewellery shop and a building society."
But is it ever a good idea to go to a pawnbroker, and what can you expect if you do? The attraction of the pawn shop is ready money with no questions asked, but you'll find yourself paying high interest rates, and could find yourself losing your valued items.
Frances Walker, of the Consumer Credit Counselling Service (CCCS), says that when the service deals with clients who are heavily in debt, it treats pawn shop debts as a priority "particularly when the item that is pawned has high sentimental value, such as your mother's wedding ring".
"It's not particularly desirable, but we do understand why people do it," she says. "It's not the worst way of getting cash. If you do it, you need to understand the rules and regulations, and make sure that the broker you go to is a member of the National Pawnbrokers Association."
There are even circumstances where a pawn shop could be a sensible financial decision. For example, if you are about to breach your bank overdraft, pawning an item to ensure that you do not go into debt with your bank could be cheaper than yet more bank charges.
The rates are often cheaper than those of comparable payday loan companies, and while pawnbrokers' interest rates look expensive, if you are genuinely only going to need the money for a couple of weeks, it can work out as a reasonable deal.
For example, if you had a luxury watch to pawn you could end up with £515 cash, which you would pay back at around eight per cent monthly interest. That's a high annual purchase rate, but if you're going to pay it back after a month you'll pay less than £50 – cheaper than going into an unauthorised overdraft.
The other advantage of a pawn shop is that it does not require credit checks that will show up on your credit file. If you are already struggling to get a credit card, more credit searches will damage your rating and make it even more difficult, but the pawn shop is a discreet place to raise finance.
To make pawning a viable borrowing activity, you need to have the right sort of item to pawn. The current high value of gold makes old jewellery a popular choice for this. The online pawnshop borro.com will lend up to 40 per cent of the second-hand value of an item. (AtW's comment: so that's like if second hand value is 50% then you get 40% of that or 20% of the original value) It lends against watches, loose diamonds (even if they've fallen out of your engagement ring), gold coins and bullion, art and antiques.
Paul Aitken, its chief executive and founder, says the average amount that the company lends is just over £1,000 – compared with smaller loans of £100 on the high street. Customers tend to be self-employed.
"They invest in things like art and antiques in the boom times (AtW's comment: oh FFS - investing into antiques and then having to pawn them?
), but we've had a couple of bad years, as you know," he says. "These people know that they need to pay salaries and if they have to sell an item quickly, they won't get a good price for it." Borro.com has lent money against luxury cars, and even planes. Ninety per cent of its pledges are redeemed.If you do go to a pawnbroker, make sure you get a proper agreement. Pawning is a simple form of finance, but you need to know how long a broker will hold your item before they would sell it on (usually six months), whether you will be repaid the value of your item if it is stolen, and the interest rate you are paying. Pawnbroking is a regulated activity.
If you can't afford to repay your debt, and you borrowed £75 or less, the pawnbroker will keep your pawn. For loans worth more than £75, the pawnbroker can sell the pawn to recover the debt. Until it is sold you can still redeem it by paying what you owe, including the interest that has built up. If you cannot pay what you owe by the deadline, the pawnbroker may keep or sell the item.
You may be able to renew the agreement, but if the broker decides to sell the pawn to recover the debt, you may still have to pay the difference if the sale doesn't cover it (although in practice most pawnbrokers won't chase you).
If the sale makes more than the loan amount, the pawnbroker must hand over any surplus, but you don't automatically receive that cash. (AtW's comment: so they MUST return it but you don't get it automatically?!?!
) If your item is sold, it's always worth following up with the pawnbroker to check you're not out of pocket. Make sure you don't lose your receipt, as this is your proof that you own your item.Before you go to a pawnbroker, however, consider cheaper and less risky alternatives. If the item you would pawn has no great sentimental value, consider what you would get for it by selling it on eBay or elsewhere instead, especially if it is easy to value. If you have a good credit rating, a 0 per cent introductory offer on a credit card is a better form of short-term debt. If you can negotiate some headroom with your bank, that will be cheaper, too.
Mr Aitken, at borro.com, does not recommend a pawnbroker for those who need money over the longer term. "It's really for people who want money quickly for a few months. It's good for cashflow problems such as buying school uniforms or even school fees."
-----------
Source: Pawnbrokers: middle classes flock to cash in their valuables - Telegraph
-----------
Final thoughts: so there you have it, at the start of new century British Middle class is pawned...
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