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."
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Questions of Cash: Why was my case ignored by My Civil Service Pension?
Offset your mortgage and save thousands
Simon Read: 'It went below the radar but you could be eligible for a tax break on your savings'
- 1 Is this bridge haunted by the ghost of nu rave?
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 The day I starred in Only Fools and Horses
- 4 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
- 5 Zayn Malik quits One Direction: Hundreds of workers request compassionate leave following band member's exit
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Revealed: Putin's army of pro-Kremlin bloggers
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
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
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
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station