Post-Christmas credit card bills, dreary weather and failed New
Year resolutions, combined with difficulty making finances stretch
to the end of a month stretching over five weekends, have
made January the most depressing time of the year.
As banks continue to clamp down on lending and the cost of
living rises, people are finding it increasingly difficult to
borrow small amounts of cash. As a result, pawnbroking, which
offers instant short-term loans on valuables such as jewellery,
gold and watches, is experiencing a resurgence.
The industry is growing by ten per cent a year with a new shop
opening every week in the UK, according to the National
Pawnbrokers' Association. This trend is supported by
statistics from The Money Shop, part of the largest network of
pawnbrokers in Europe, which plans to open a further 50 Money Shop
Pawnbroker stores this year, creating around 330 new jobs.
The short-term lender has reported that the month, which is
traditionally the busiest time of the year for the pawnbroking
trade, has witnessed it busiest January to date, and this trend
looks set to continue well into the New Year as customers struggle
to stretch pre-Christmas wages and pawn valuables to free up
cash.
Neil Surgenor, head of pawnbroking at The Money Shop, said: "We
have witnessed an influx of people who have been refused credit by
their banks and are unable to take out unsecured loans. The
difference between pawnbroking and other short-term loan solutions
is that customers view it as borrowing from themselves.
"In fact, 80 per cent of our customers come back for their
pawned possessions. Of those that default on their loan, any money
made over and above the cost of the item and the interest owed,
once sold at auction, is returned to the customer."
And he added that the buoyant gold market is helping to
contribute to a change in consumer attitudes towards
pawnbroking.
"Negative connotations of the pawnbroking industry are declining
and a post-ebay generation has emerged, that is more open to
pawning. They see it as just another way of borrowing," said Mr
Surgenor.
Gold makes up to 95 per cent of The Money Shop's pawnbroking
trade, and is expected to increase as more and more people
recognise the opportunity to turn an unused asset into cash.
For example, a nine carat gold bracelet with an insurance value
of £1,000 in November 2010 might have secured a short-term
loan of up to £350 at the time. Fifteen months on and the
same piece could be worth £1,260 and a loan of £450
might be offered.
Pawnbroking is a quick and secured form of borrowing where cash
is offered in exchange for an asset. The loan is calculated based
on the value of the pledge, and the amount of interest payable is
worked out accordingly. Typically interest rates are an average of
7.99 per cent per month; an APR of 114 per cent. The most commonly
pledged items at Money Shop Pawnbroker stores are gold, jewellery,
diamonds, silver and watches.
The Money Shop is a professional lender and a member of the
National Pawnbroking Association. It is regulated by the
Office of Fair Trading.
As well as The Money Shop, Dollar Financial UK operates online
lending services through its PaydayUK and Payday Express brands;
business loans, through Merchant Cash Express; jewellery and
pawnbroking through its specialists at Suttons and Robertsons in
London, Duncanson and Edwards in Edinburgh and Robert Biggar in
Glasgow. It employs more than 2,100 staff.