The boom in ‘posh’ pawnbrokers

If you watch any TV at all you’ve probably at least glanced at some of the myriad “Pawn” reality shows that have become so popular as of late. On most of those shows you’ll find people coming in to the shops with the occasional valuable knickknack or collectible but, for the most part, they’re not arriving with anything that has true high-end value. On the other hand, in the actual “real” world, cash poor but asset rich Americans are turning to pawn brokers for short-term loans, something that has been dubbed “high-class pawn brokering”.

Pawn brokers have been around for ages and, with the days of easy credit long gone, people are turning to them in bigger numbers and putting up their possessions as collateral for short-term loans. Things like fine art, luxury watches, boats and motorcycles and even of fine wine are being used to do this and, the once that loan is paid back, the items return to their owners.

Of course one of the main differences that you’ll find with some of the new high-class pawnbrokers that are coming onto the scene is that, for the most part, none of them mention the words “pawn” or “broking” because of the image that those two words usually produce in a person’s mind of dingy shops with sketchy looking characters behind the counter. (Kind of like those reality TV shows.)

The system is basically the same but, instead of dealing with people who are trying to get a few bucks for their wedding ring to play the slots in Las Vegas, these are people that have more wealth in assets than they actually have available in their bank accounts. Most of the people you find going to these high-class pawnbrokers have what could be looked at as “irregular” incomes and might not always have the cash on hand that they need to take advantage of an opportunity. Thus, if an opportunity does arise and they don’t have the cash necessary, pawning their valuable assets in return for a short term loan is the way to go.

Indeed, pawnbrokers have actually been able to step in and fill the credit role that has been vacated by banks that have tightened their lending conditions. In 2013 the market increased by over 15% and the vast majority of that was due to middle income customers and small business owners.

This increase belies the fact that, for the most part, the interest rates that you find with a posh pawnbroker are actually quite steep at around 7% a month. That being said, the industry is heavily regulated and, just as they have rights under the consumer credit act and other consumer lending laws, consumers are protected when they use a pawnbroker to secure loans using their non-cash assets.

At the end of the day the people that are using high-class pawn brokers are already the people that were able to afford the types of items that they can pawn for large amounts of money. With banks tightening their loan restrictions, it’s definitely going to be an industry that will continue to increase over the next few years.

So, if you’re in need of a loan to take advantage of a business opportunity and you find that your local bank doesn’t want to play ball, consider going to your local posh pawnbroker with your wine collection or your Rolex and asking them what they can do for you instead. Just make sure that, if you don’t want people to know you’re actually using a pawnbroker, you don’t go to a shop that’s featured in one of the shows on TV.

Comments

The boom in ‘posh’ pawnbrokers — 7 Comments

  1. I have watched few episodes from such a show and just couldn’t take it anymore. The prices people get for their goods are a RIP OFF in most cases. What I cannot understand is why in this era of online selling, people still go to these sharks and not create an account on ebay and sell their stuff there? We have sold some stuff and got excellent prices for it. It just takes more smarts though, than to rush to the pawnbroker :D

  2. We haven’t used a pawn broker for a loan, but I have gone in to look at items they have for sale from defaulted loans. My wife and I looked at rings at a few pawn shops before we got married, but we were not all that impressed.

  3. The pawn brokers is an option, but it’s a pitty that individual can’t just sell their high prices item (so long as it’s not sentimental) of course. Beats paying 7% interest. But maybe it’s just the easy option to go to a pawn broker.

  4. Pingback: Carnival of Financial Independence – 32nd – October 12th, 2013 Edition — My Personal Finance Journey

  5. Like most people, I see those places as a huge rip off but if you are doing it for a small business loan until you can get your business of the ground, I can understand it. With the banks tightening their belts, it is getting harder and harder to find credit with a bank.

  6. Pingback: Financial Carnival for Young Adults - Mom and Dad Money

  7. Pingback: Carnival of Money #1 | Carnival of Money