Inspired by another thread today, someone needing quick cash, i thought i would put together this small guide to how pawnbroking works in the UK in case anyone is ever in a sticky jam, and needs cash quick same-day and how you can use your gold to make it happen. Hope nobody ever needs it but it is here to help
Pawnbrokers – How do they work ?
When you approach a pawnbroker you have two choices
1. Either to leave something valuable as security for a £ loan, for example, an asset such as a gold coin, jewellery or an antique,
2. Sell the item to the pawnbroker
This info below explains the first option.
Pawnbrokers can lend money quickly BUT charge higher % rates of interest than high street banks/credit cards/overdrafts.
What are Pawnbrokers?
You hand over the item (known as a pawn or pledge) to the pawnbroker who will value it for you.
With the likes of a 1oz gold coin for example, it is easy to know the current market value of your item ie just look what spot price of gold is
The pawnbroker should give you a ‘Pre-contract Credit Information form’ if you are a new customer
A reputable Pawnbroker is very likely to ask you for valid ID (passport/driving license) and address proofs (utility bill/bank/council tax statement) to verify your identity/address
if you’ve borrowed from the pawnbroker in the last 3 years, you can ask for this (and it’s always best to do so).
Once valued, and loan amount agreed
You’ll be given a "Credit Agreement" to sign - check this carefully and ask questions if you don’t understand anything. Be sure the APR % you will be paying is visible
The agreement will set out "how long" the loan lasts and how much £ it will cost.
It will usually be a minimum of six months (but you can agree a shorter or longer period). APR on the loan will vary accordingly, shorter period expect a higher APR,
Unless it’s part of the credit agreement, the pawnbroker will give you a separate pawn receipt which you’ll need to keep to prove you own the item.
You can redeem the pawn at any time, by paying back what you owe + the accrued interest and getting the item back. The pawn broker will most likely have a minimum amount of interest to be paid (i.e. x1 month)
If you don’t repay the loan during the redemption period, the pawnbroker can sell it to recover the lent cash.
!!! 100% ALWAYS ALWAYS ALWAYS - KEEP YOUR CREDIT AGREEMENT & PLEDGE RECEIPT - AS IT IS 100% ESSENTIAL FOR THE REDEEMING OF YOUR GOODS !!!
There is a 14-day cooling off period, within which you have a right to withdraw from the agreement and just pay interest for the period of the credit.
If you want to use a pawnbroker choose one that is a member of the National Pawnbrokers’ Association, which has a code of conduct for members.
Visit the National Pawnbroker’s Association’s website http://www.thenpa.com/
How do pawnbrokers work? – what you’ll pay, and how
You can expect to pay a pawnbroker a rate of APR % interest that is more than a high street bank loan/credit card cash advance/overdraft, but normally a lot less than a payday loan company (Wonga.QuickQuid,Sunny etc) or door stop lender (ie Provident) or even worse yet local loan shark
You might be quoted a monthly OR daily interest rate, although the pawnbroker MUST also show the annual interest rate and the APR ( the annual percentage rate of charge).
A daily rate may used to make it look less % just x by 365
and monthly rate x by 12 to check the APR's figures both tally up.
Shop around to find the most competitive rates. An APR rate of 70% - 125% is typical
You’ll usually repay the loan in one payment, rather than in instalments. ( ie once you have the borrow amount & interest on contract)
If you need more time to repay, the pawnbroker might agree to extend the term and draw up a new credit agreement, although they can refuse.
They’ll normally expect you to at least pay back the interest you owe, before drawing up another extended agreement.
What you can pawn
You can pawn anything of value that can be re-sold.
Jewellery is the most popular item to pawn, but people have been known to pawn anything from designer handbags to an exotic or vintage car.
For the purposes of this forum gold coins are perfect items to pawn as they are easily priced/valued against current market rate of gold spot price
Pawnbrokers – the pros
If you have a poor credit rating it might be easier to borrow from a pawnbroker than another lender, as the value of the item determines what you can borrow, not your previous borrowing/payment history
No credit checks are done, no personal judgements are made on you. A pawnbroker, wants and values your business as it pays his wages.
It’s a quick service – normally you will have your money the same day. Payment is most often wanted in hard cash
A pawnbroker should let you redeem your goods at any time and only charge interest for the period you have borrowed the money.
If the item is sold and there is a shortfall, the pawnbroker will usually not pursue you for this (but check whether that will be the case).
Pawnbrokers – the cons
Using a pawnbroker is an expensive way to borrow. Compared to traditional borrowing like credit cards/overdrafts/personal loans.
You can only borrow a percentage of the value of the item you want to pawn. So if, for example, you have a 1oz gold coin worth £1,000, you might only be able to borrow £600 against it. You will never be offered full current market value
What to do if you can’t pay them back
If you can’t repay your loan by the deadline and you don’t want your item to be sold, you can ask the pawnbroker if they are prepared to extend the deadline, but they’re not obliged to agree.
If you borrowed up to £75 and you cannot repay the loan, ownership of the item will pass automatically to the pawnbroker.
If you borrowed more than £75, the pawnbroker can sell it and keep the proceeds - but they have to try to get the best value for the item, and if there’s any surplus (after the debt is paid and costs deducted such as auction costs) they have to return this to you.
If the loan is for over £100 the pawnbroker has to tell you in advance, they are going to sell it.
This gives you a chance to pay them and get your goods back.
What happens if you lose your receipt
If you borrowed up to £75 you can ask the pawnbroker for a ‘standard form’ which you sign to say the property is yours.
If you borrowed more than £75, you will need to sign a statutory declaration.
This might involve going to a magistrate or a Commissioner for Oaths, or a Justice of the Peace if you live in Scotland.
You can also go to a solicitor, but they are likely to charge a fee for this.
What happens if you don’t repay the debt
Make sure you know the value of the item before you pawn it, that way you have evidence if you feel the pawnbroker has sold it for less than it was worth.
First, complain to the pawnbroker in writing.
You can use evidence such as newspaper clippings or written quotes to back up your claim.
If the pawnbroker doesn’t respond or you don’t manage to sort out the problem within eight weeks, you can take your complaint to the Financial Ombudsman Service (FOS).
You can take a pawnbroker to the Small Claims Court but there are fees to pay and there is always a risk that the settlement reached might not be what you want. http://www.financial-ombudsman.org.uk/consumer/complaints.htm
Hope this helps anyone who might be in a temporary financial pickle
Shield sovereigns and half sovereigns are in great demand and their prices appear to be rising year on year as they seem to be getting scarcer.
I have a collection of these and happy to sell a few to fund my collection of gold beasts.
I am showing six half sovereigns all dated 1892.
Each coin is photographed on both sides and labelled A to F so can be individually selected.
The price per coin is £145 and special delivery will be at cost i.e. £6.60 irrespective of the quantity in the shipment.
Payment for single coins can be bank transfer or PayPal gift.
Payment for all 6 coins by bank transfer.
I don't personally for the most part but I can see the allure to some of them. If you like them and can get them at a decent price then why not?
My personal issue with them though is I feel they are misleading with regards to what the product is. The companies put these coins out as limited releases yet they are based upon coins that are minted in the many millions so there is no rarity. Another company or skilled inidividual could just copy any "limited" design. As long as people approach it in the sense of them being a novelty and not a collectors item that will increase in value then there's no harm I guess but I do very much dislike misleading marketing.
I have no issue with coloured coins issued by the larger mints when those mintages are clearly what they are and there is nothing underhand or misleading happening.
And a further thought, historically gold has usually held its value when compared to inflation, so as a storage of wealth it's a good asset.
Silver on the other hand is all over the place and historically never held its value when compared to inflation. Apart from the well known times that the silver price was manipulated. Anyone buying silver coins/bullion is going to have to rely on another price manipulation to make their investment become good over time. Trying to beat the 2% inflation per year is not easy with silver.
Some good points above to ponder.
My original thought was to sell the silver coins/bullion/rounds to buy sovs, and to put some money into silver on Bullion vault and scrap sterling silver.
The idea being that it's easy to liquidate the sovs, sterling silver and bullion vault, plus the spread on gold is about 5% and the silver would be around 2% for BV and 10% for the scrap at the most.
Unfortunately I followed the advice of the "collectors" on here and bought into lunars, stock horses, Brits and the rest of the "stackers" bread and butter. I was new to the game and easily convinced. I see the same tactics here with slabbed and poured silver today.
I don't care what anyone thinks, unless silver reaches £50 in the next 10 years, everyone currently holding any silver coins, slabs or bars, will lose money, when inflation is taken into account. The vat and the premiums kill holding silver long term.
I should have stuck with my gut feelings with silver. I still think silver has its place in investment terms, but I need to buy and sell close to spot, and not have to contend with the vagaries of premiums and relying on collectors to buy.
Luckily I've not mortgaged the house to buy silver, I can afford to sit on it, bide my time, and keep my fingers crossed that it goes to the moon as promised. If not my kids and grandkids can have it.
A good start!
Read through all of this section, lots of good advice, and pay particular attention to @vand's posts.
His attitude is frugal (brutal?!) but I believe it's tough out there for your age group.
Yet, your age is your advantage, you can make mistakes and still have time to recover so your risk tolerance will be different to mine.
Gathering wealth is easy. Spend less than you earn, put away at least 10-20% of your income each month and watch the pot grow.