Spurned by the banks, Middle Britain is pawning its possessions
The growing ranks of credit card rejects are putting up their valuables to avert a cash-flow crisis
Sunday 29 June 2008
The credit crunch has hit hard and many of us have tightened our belts, but it's a different story for the pawnbroking industry where business is on the up, as more of us search for a little extra cash.
But forget those scruffy shops lurking in dark alleys; pawnbrokers can now be found on the high street alongside banks and building societies, competing with them for our short- term loans business. There are now 800 pawnbrokers in the UK, with new outlets growing at a rate of 10 per cent a year, according to the National Pawnbrokers Association (NPA).
Pawning involves taking out a "secured" loan against a personal possession, often jewellery. You will then pay interest on that money. Like having a mortgage, you only lose your property if you can't repay the loan.
Those sinister Dickensian images of pawnbroking are wide of the mark too, as the industry is regulated under the 1974 Consumer Credit Act. There are strict measures in place to ensure goods can't be sold off before customers have had a chance to repay the loan.
For many years the bread and butter of the industry has been those people with a poor credit rating, or without a bank account, for whom securing reasonably priced loans and credit cards is difficult. But because of the economic tightening, it's now becoming "a popular option for the middle classes", says Chris Tapp from the education charity Creditaction.
As the big lenders react to their own funding problems by cherry- picking customers, they are rejecting new credit card applications at the rate of 18,000 a day, reports the financial comparison site MoneyExpert.com. Those who used to be able to choose from a plethora of 0 per cent card deals to juggle debts or fund a "buy now pay later" lifestyle have now found the taps are being turned off. As a result, they are looking outside the mainstream for credit.
"Pawning can be a good option if you're after a short- term emergency fund," says Mr Tapp. This might be needed to address cash-flow problems if the boiler breaks down, say, or a big bill lands. But he adds that if debt continues to be an issue, extra borrowing will mean "you're merely shifting the problem around and not tackling it". In this situation you should seek specialist help from organisations like Creditaction, Citizens Advice, the Consumer Credit Counselling Service or National Debtline.
Most pawnbrokers want gold or diamond jewellery but some will accept musical instruments, electrical items and cameras. Based on their value, you will be offered a loan for up to six months, with interest charged on a monthly basis.
The interest rate, "can be high if you take it as an annual percentage rate", admits Josh Fish of Fish Brothers, a London-based pawnbroker. But in the short term "based on the average £100 loan, it costs under £8 a month in interest".
This, says Des Milligan, chief executive of the NPA, is much cheaper than an unauthorised overdraft at the bank, which typically costs £30 to £50 a time if you slip just a few pence into the red. "So it can make economic sense to pawn," depending on how quickly you want the money and for how long.
However, "if you're looking for a loan over two to three years then pawnbroking is not the product for you," says John Nichols, chief executive of pawnbrokers H&T.
If you're seeking to sell possessions rather than pawn them, some pawnbrokers will be prepared to take on your business. But as Mr Nichols says: "We give the same amount if we buy as we would on a loan."
People are encouraged to pawn because the hope is that the customer will return to repay the loan in full as well as the interest.
But if you're looking to sell, pawning could generate more money: if you don't retrieve your goods within the six months or so specified in the agreement and they are sold at auction, "the customer is due any surplus after interest charges have been deducted," says Mr Milligan.
Jo Hill is the manager of the Croydon branch of pawnbroker and financial adviser Albemarle & Bond. She says the number of people looking to pawn goods has increased by a third in the past year. "We're getting people in needing cash to pay a credit card or catalogue bill or even borrow £50 to cover the cost of the kids' school uniform," she says, adding that many people find the lack of credit checks appealing. "Even if you don't come back to recover your goods, it won't count against you or affect your credit rating."
Some people may worry that they will never see their possessions again once they've pawned them to raise emergency cash. But Ms Hill says goods are usually recovered within two to three months and over 80 per cent of customers redeem their goods.
'It's harder now to manage to the end of the month'
Charlene Ilori, 26, works full time as a supervisor for a London flooring firm. She earns a regular salary but makes the occasional visit to her local pawnbroker if she runs short of money before pay day.
"With prices going up, it's that little bit harder to manage till the end of the month on what I've got, so I'll often pawn something to pay my credit card bill or for holiday money," says Charlene. "I've got some gold jewellery, and while I don't wear it now, I wouldn't want to lose it. So I tend to take in the same item a couple of months running to get some cash."
She says she typically borrows £100 each time, which costs her £8 a month in interest, though because of the value of her jewellery, she could borrow more. "But that's all I need. In fact the most I ever borrowed was £250." And once she's paid, Charlene returns to settle up and reclaim her jewellery.
She admits she felt awkward the first time she went to the pawnbroker, but adds that it's more economical to borrow this way. "If I run short, it's easier than taking cash out on my card, which costs me fees and interest."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Best savings rates are not all they might seem
Minister's pension promise to firefighters challenged
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
- 1 Christmas comes early to Hong Kong, as millions of bank notes spill out onto busy street
- 2 The 'Black Museum': After 150 years, public can visit police’s grisly crime museum
- 4 Vagina canoe artist facing two years in jail defends herself over ‘obscenity’ charges
- 5 The Queen’s speech 2014: Recap and Twitter reaction to Game of Thrones reference
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Alex Salmond has 'broken his word to the Scottish people' says Scottish Lib Dem leader
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens