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

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

peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
New Articles
tvChristmas special reviewed
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
Life and Style
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

    Christmas without hope

    Gaza fears grow that conflict with Israel will soon reignite
    After 150 years, you can finally visit the grisliest museum in the country

    The 'Black Museum'

    After 150 years, you can finally visit Britain's grisliest museum
    No ho-ho-hos with Nick Frost's badass Santa

    No ho-ho-hos with Nick Frost's badass Santa

    Doctor Who Christmas Special TV review
    Chilly Christmas: Swimmers take festive dip for charity

    Chilly Christmas

    Swimmers dive into freezing British waters for charity
    Veterans' hostel 'overwhelmed by kindness' for festive dinner

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all