Pawn Shop Loan vs Bank Loan
Pawning at the pawn shop is an age-old tradition whereby clients come to the store to pledge their collaterals and in return, they get a loan for them.
Why do people come to the pawn shop to get a loan instead of going to the conventional route of asking for a loan from a bank?
The reason is simple. Getting a loan from pawn shops is hassle free. Anyone who has valuables and is above 16 years of age can put their precious gold, white gold and branded watches at the store as a pledge. At the end of 6 months, they can redeem their items by paying the stated interest and the principal loan amount.
If you wish to borrow from the banks, this would take time with application and entails certain administrative checks. Even if the banks promise you a quick loan process, ultimately they are still guided by a set of rules and regulations. The banks can only loan you up to a certain multiple of your income anyway.
For those who need emergency cash to tide over credit cards monthly installments or to pay for medical treatment fees before the month-end payday is here, a quick fuss free short term loan is really what you need. No application, no hard scrutiny at your income level. Besides, the precious items that you place at the pawn shop are collaterals which can be redeemed at any time before the 6 months is up too. Terms and Conditions apply.
The pawn shop patrons come from all socio-economic classes which include well-heeled businessmen with temporary cash flow issues.
Pawn Shop Revolution
Gone are the days of the dingy-looking pawn shop. Swanky shop fronts are the order of the day. The industry is also injected with fresh young blood when the children of family-owned pawn shop take over the business. With them come a plethora of ideas to revolutionise the industry. Modern facade with friendly and approachable decor, promotional interest rates and advertising campaigns change the whole ball game of the industry.
With advertising campaigns and media coverage, people in their 30s or younger are more aware of what the pawn shop does. They do not shun these stores anymore. The stigma of visiting one is weakened. This really gives the pawn shop more brawn to muscle on and to attract a potential pool of untapped clients unlike the bygone days.
With gold as a highly regarded asset that can hedge against inflation, a lot of people are motivated to cash in their gold and white gold jewelry. This has led to a tremendous 43 per cent jump in pawn shop loans from close to $5 billion in the year 2011 to $7.1 billion in 2012. The Registry of Moneylenders and Pawnbrokers has registered only $1.2 billion to $1.8 billion a year in loans for the period between 2002 and 2008.
With this healthy state, the pawn shop industry is set to take off to greater heights.
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