What is pawnbroking?

If you’ve recently stumbled into the world of pawnbroking or you’re thinking about pawning an item, here’s a useful guide to brush up your knowledge and help you make the right decision before you pledge any valuables.

What is pawnbroking?

A pawnbroker or pawnbroking business offers secure loans against personal collateral such as gold, silver and luxury watches to name but a few.

When you ‘pledge’ your item(s), a pawnbroker must keep them for a minimum of six months, with early collection available provided the loan plus agreed interest is repaid.

All transactions are guided by the Consumer Credit Act 1974, which, among other rights, means you can give notice to withdraw from an agreement within 14 days if you decide to change your mind.

A pawnbrokers will loan against most items of value including luxury watches.

What happens if you don’t repay your loan?

Should you not repay your loan or confirm a credit extension, a pawnbroker can sell your pledged item(s) and use the money to pay off your debt.

Where does the word ‘pawnbroking’ come from?

The word ‘pawn’ derives from the Latin word ‘pignus’ or ‘pledge’, with items being pawned known as ‘pledges’ or ‘pawns’.

A pawnbroker is often associated with three golden balls, each of which symbolises a bag of gold which St Nicholas allegedly loaned to three girls to save them from destitution.

What are the advantages of pawnbroking?

No credit checks

Because your loan is secured against the items you pledge, there is no need for a credit check.

Retain ownership

Provided your loan is fully repaid with agreed interest, you can retain ownership of your item(s).

Instant loans

On the basis a pawnbroker is satisfied with the authenticity of your item(s), a loan is usually secured within 24 hours.

No impact on credit history

If you can’t repay your loan, a pawnbroker can sell your item(s) to recover losses, with no impact on your credit rating.

Secured storage

All pledged items are safely stored and protected in a vault throughout your contractual period.

Minimal paperwork

To secure a loan, a pawnbroker will ask for a valid proof of identification and, in some instances, proof of purchase.

What are the disadvantages of pawnbroking?

You can lose your item(s)

If you do not repay your loan within the contractual time period, a pawnbroker has the right to sell your items.

You might be refused a loan

If a pawnbroker doesn’t see value in your item(s), they might not be accepted as a pledge against a loan.

Higher interest rates

Pawnbrokers typically charge a higher Annual Percentage Rate (APR) than standard lenders.

Before a loan is approved, a pawnbroker will also value and check the authenticity of your item(s).

What’s the breakdown of a typical pawnbroking loan?

Every pawnbroker is different and will vary in interest rates and loan periods depending on who you use.

At GA Pawnbrokers, for every month your item is with us, 7.5% of the initial loan value is added to the redemption value. This means that for a £100 loan, £7.50 is added monthly as interest to the initial loan value. Representative APR 90%.

Our contracts are based on a seven-month lending period, however, you can choose to leave your items in pawn with us by paying the interest owed to extend the contract.

What items can you pawn?

As a general rule, you can pawn against anything of value, be it:

  • gold or silver
  • diamonds and jewels
  • luxury watches
  • vintage video games
  • electrical goods
  • musical equipment
  • vehicles

If you’re not sure whether your item can be secured against a loan, feel free to get in touch.

Is it better to pawn or sell an item?

Deciding whether to pawn or sell your item(s) will depend on your circumstances. If you need to raise as much cash as possible, it’s often best to sell your item(s). However, if you need a quick loan and don’t want to part with items that carry sentimental value, pawning might be a better option for you.

What other services does a pawnbroker offer?

Alongside standard pawnbroking services, your local pawnbroker might offer Buy Back services, valuations, watch and jewellery repairs, currency exchange and many more.

Talk to our team

If you have a question about pawnbroking or you are thinking about pawning or selling an item, find a GA Pawnbrokers store near you today.