The traditional image of pawn broking is of a miserly old man in a cluttered backroom, coins piled high to either side as he squints into the gloom.  In truth, despite its persistence, this Dickensian conception is rather out-dated.  Pawn broking is a highly misunderstood concept, and yet it actually turns on a very simple, and arguably fair, principle.

Pawn broking is most easily understood if you see it in terms of a loan.  Money is lent, and in return an item of value is handed over as security, in the same way that a person’s home or car is used as leverage on a secured loan.  This nullifies the need for credit checks, making pawn broking a fantastic solution for those with a poor credit record.

If you think that pawn broking could be an option for you, then read on to find out more.

How Does it Work

Pawn broking turns on an easy to understand concept.  Essentially, when you walk into a pawnshop, you hand over an item and the pawnbroker values it for you.  If you’re satisfied with their valuation, they’ll present you with a pre-contract information document, setting out the terms of your agreement.  This will include details such as the duration of the loan.

If you agree to the contract the broker suggests, then a pawn receipt will be presented to you.  This acts as proof of your ownership, and must be handed over once the loan is repaid in order to reclaim your item.  Should you fail to recompense the pawnbroker before the end of the agreed period, this item will be forfeited and the pawnbroker may sell it in order to recover their capital.

Victorian Streets of Riverside Museum by deadmanjones, on Flickr.  This work is licensed under a Creative Commons Attribution-NonCommercial 2.0 Generic License.

The Advantages of Using a Pawnbroker

As we’ve explained, the concept of pawn broking is not dissimilar to that of a secured loan, except that the amounts tend to be smaller.  They also carry significantly higher interest rates than borrowing from high street banks, so why do people choose them over the various other available options?

No Credit Checks

One major advantage of choosing to use a pawnbroker is that there are no credit checks that you need to pass in order to be eligible for borrowing.  The item you pawn is security enough in itself, which means that it’s a fantastic option for those with a poor credit rating.

Fast

The fact that there are no credit checks to pass cuts down on the time spent assessing your eligibility to borrow money, and this, combined with the simplicity of the agreement, means that you can access the capital you need quickly.

Flexible

An additional advantage is that pawnbrokers tend to be a lot more flexible with regards to redemption dates and the amount of interest charged than their counterparts.  This means that if you can repay them more quickly than predicted, you could pay less than you expected to, and have your item back and safe in your possession before you know it.

Could pawn broking be the perfect borrowing option for you?