In the face of escalating costs of living and lack of financial assistance, Clare Adams found herself cornered into making tough decisions to stay afloat. She turned to pawnbrokers, exchanging cherished personal belongings for quick cash to cover her mounting bills and groceries – a reality shared by countless individuals in her plight.
An upswing in pawnbroking is indicative of the intensifying financial crisis, with the Financial Conduct Authority reporting a 25% surge in new loans from pawnbrokers over the past year. Debt Charity StepChange underscores that these statistics underscore the desperation sparked by the cost-of-living crisis people face.
However, as Richard Lane, the charity’s Director of External Affairs warns, pawnbroking may exacerbate, rather than mitigate, the long-term financial stability of individuals. Despite this caution, the harsh restrictions on payday lenders have left many with no other avenue for immediate funds but to turn to pawnbrokers.
At Pickwick Jewellers & Pawnbrokers in south-east London, Adams was pressured into parting with her wedding, eternity and engagement rings to get a quick loan of £200 for utilities and food. Adams, who had previously pawned jewelry pieces, asserted that the skyrocketing cost of living necessitated these decisions. Today, her cupboards are often bare, and the challenging situation requires every ounce of her resilience.
Adams sees pawnbrokers as a lifeline, delivering the needed cash quickly. Conversely, she fears that traditional loans would only push her further into the crippling claws of debt.
Nathan Finch, the operating manager at Pickwick, noted an increase in pawnbroking transactions across all economic classes due to the financial crunch and inflation.
Financial Conduct Authority data reveals that £440m was loaned to customers through pawnbrokers in the year to June, as compared to £351m the previous year. The authority is actively working to elevate standards in the high-cost credit industry, inclusive of pawnbrokers.
To clarify the mechanics of pawnbroking, the customer pledges an item for a cash loan, typically equal to 50% to 60% of the item’s value for a period of six months, with interest rates of 7% to 8% per month. The item can be reclaimed during the loan period by repaying the borrowed amount and the accumulated interest. If the customer cannot repay the loan at the end of the term, the pawnbroker sells the item and returns any surplus to the customer.
A 2022 report shows that over 350,000 people resort to pawnbroking annually. Critics lament that high-interest rates and low prices for goods make this a suboptimal solution. However, for some, especially those unable to secure bank loans, the alternative would be loan sharks.
Geoffrey Simmons, who started trading his items for cash six years ago, credits pawnbrokers as a godsend that helped maintain his financial stability. Today, after paying his bills from his state pension, he is left with a meager £20 for four weeks. Despite being consistently able to retrieve his pawned items on time, the fear of being denied credit card applications persists. In such trying times, his cherished pieces become his emergency fund.
