Pawnbroking is a custom as old as time – it even existed in the Ancient Greek and Roman Empires. The practice arrived in England with William the Conqueror in the 1050s and has been used by kings and paupers to help raise cash at essential moments. Even some of the most successful historical figures have a history of pawning their stuff – King Henry V pawned his jewels in 1415 to raise money for a war with France. The famous Medici family of Florence is thought to have provided the symbol of pawnbrokers worldwide – three spheres hanging from a bar. Wherever you see that sign then there’s a pawnbroker nearby.
Does pawnbroking still exist?
Yes, very much so. If you’re looking to pawn one of your possessions then you normally have two options. Either you can opt to sell the item to the pawnbroker or you can loan cash from the pawnbroker for a set period, such as six months, with the item as security. You can retrieve what you’ve pawned at any time by repaying the loan and the interest up to that point. If you can’t repay the loan then the pawnbroker keeps whatever possession you provided. In every case it’s the pawnbroker who sets the price that you’ll get for the item you’ve pawned. You’ll then expect to pay 7% to 8% interest every month.
How does a pawnbroker decide on a price?
Lots of factors come into play. For example, pawnbrokers will look at the resale value of the item. They will also bear in mind the supply and demand – rare, wanted items are likely to be worth more. The pawnbroker will also take into account any interest that is going to be paid on the loan and also how saleable an item is/whether it is damaged. Many pawnbrokers start with a price range of the wholesale price up to the retail price and then increase or discount based on these other factors mentioned to establish value. The pawnbroker then offers 50% to 60% of the item’s value as a cash loan.
What items is it possible to pawn?
The short answer is everything and anything. If you have something a pawnbroker can see some value in then you’ll get a price for it. This has resulted in some pretty weird and wonderful items being offered:
Gold false teeth
A fishing trawler
Toupees and wigs
A glass eye
A herd of cattle
A swimming pool (still in the ground)
Bodily fluids of famous rock stars
Urns of ashes of dead relatives
Different types of pawnbrokers have evolved for niche markets – there are even luxury pawnbrokers for big-ticket items. However, across the board, jewellery is probably the most common item offered as security for a loan in a pawnshop. That and items of furniture, watches, designer handbags and even the odd car or work of art.
Why would you use a pawnbroker?
It might seem strange for someone in possession of designer handbags, expensive jewellery or high-end cars to look to a pawnbroker for help. However, the pawnbroker provides a simple solution to what can be a big problem from all sorts of people: a lack of cash. You might have lots of expensive possessions but very little cash – so, by pawning something, you can create some cash to spend.
If you’re not happy you can make a complaint to the Financial Ombudsman Service – roughly 30% of complaints made against pawnbrokers are upheld.
Ensure you know the value of what you’re pawning if you want to get the best deal. Do your own research into supply and demand, wholesale and retail values and what similar items would sell for on an open market. You might even want to take proof of these to help the pawnbroker make the right decision.
The alternative to pawnbroking: short term lending
Payday loans and doorstep loans provide an alternative to working with a pawnbroker. There are a number of differences between these lending options and taking items to a pawnshop.
Payday loans and doorstep loans don’t require a valuable asset as security i.e. you don’t need to provide an item in exchange for the loan.
Pawnshop loans don’t have set value limits. What you can borrow depends entirely on the value of the item.
Payday loans and doorstep loans use factors such as salary and credit score to determine what you can borrow.
You can apply for payday loans and doorstep loans entirely online; pawnbroking must be done in person.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley