Pawnbrokers: making the right decision for you

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Mention the word ‘pawnbroker’ to people and most will wince. It seems to carry a negative connotation, harking back to an almost Dickensian world of desperate trading for people who are down on their luck and need money quickly, at the expense of valuable items. They’re generally not places of happiness or joy, more shops that hold sentimental items and tales of people giving up that which they once loved.

Here’s how they work: you take an object into the pawnbroker and essentially leave it there, as a collateral for a given loan. So if, for example, you needed a loan of £10,000, you could take an expensive item of jewellery in good condition with you and pawn it, borrowing the money and paying it back (with interest) for the length of the term. Once that’s up, and the loan is repaid, you can go back and claim your item back. Should you renege on the deal, the pawnbroker can sell the item.

The main reason that pawnbrokers have a less-than-stellar reputation is that there’s often no credit check, meaning that anyone with an item can borrow the money. Some pawnbrokers will only accept certain types of objects. Those items could be family heirlooms such as paintings or jewellery, so one can be sure that this is a last resort for someone who may not own a home or car, or at least not want to put either up for collateral.

You might not be able to borrow the full value of the item, and instead borrow a percentage of it, and the interest rate might be higher than you would pay from a standard loan. Pawnbroker terms generally last for six months and, if you need to renegotiate the length of the term, there is no obligation for the pawnbroker to do so. Keep your receipt, as this can be used to get the item back at the end of the stint, or within 14 days if you change your mind.

However, there are certain advantages to using a pawnbroker. For a start, because there is no credit check, people can borrow quickly – and this could be ideal for those who have turned their lives around but are still dogged by bad finances from several years before that appear on credit files.

The legal contract that accompanies a pawnbroker agreement works two ways and the agreement could even benefit you; it might seem unlikely that a pawnbroker could wildly overestimate the value of the item you’re pawning, but it is possible. Therefore, you could borrow more money than the item is worth, and should you default the pawnbroker could be at a loss. It’s more of a theoretical possibility than a realistic one, as they tend to do their research and are knowledgeable in their field.

There are a few other things to take into account. Firstly, you must be over the age of 18 and you’ll need a form of recognised ID to pawn your item. Secondly, your rare piece of nostalgia will be one of many similar items and antiquities, all in one place; it’s no surprise that burglars sometimes target pawnbrokers in brazen ramraids. Thirdly, and in a reversal of the same point, pawnbrokers can be great places to pick up unusual or rare items for the buyer – if they can put aside their guilt at handling what was once someone’s possessions.

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