Pawnbroking – core differences between the Pawnbroking industry in the UK and the US

Pawnbroking – core differences between the Pawnbroking industry in the UK and the US

A long time ago, about 3,000 years ago in ancient China, the Chinese developed a method of granting short-term credit to peasants. This method (now known as Pawnbroking) became popular in ancient Greece and Rome and spread to most parts of Europe. In England, Pawnbroking has its origin traced to William the Conqueror. The Lombards of England and Medicis of Italy became respected as money-lending families. The Lombards were so popular that the name became synonymous with Pawnbroking. Popular Pawnbroking stories include that of England’s King Edward III who famously pawned his jewels to the Lombards in 1388, to finance his war against France. Queen Isabella of Spain was also known to have pawned her jewellery to fund Christopher Columbus’ expedition to the New World.

‘Pawn’ is a word of Latin origin ‘Patinum’ which means ‘cloth/clothing’. The cloth was valuable to the working class and was commonly used as a pawn or collateral for quick cash. Today, pawnbrokers accept valuables such as antique, gold, jewellery, diamond, cars, appliances, and luxury watches in exchange for fast and quick cash. These items are easy to value and store, they do not generally depreciate or perish and they have an established second-hand market.

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Generally, to enjoy the many advantages of Pawnbroking which ranges from the ease of business and quick cash, the absence of credit check, confidentiality of service, minimal paperwork and ability to redeem your valuables anytime etc., you begin by walking into a pawnshop. The broker values your collateral, gives you a number he can lend you for your valuables and the interest you will pay in addition to the original sum. He then draws up an agreement, after he has certified that you are above 18 years, a legal resident and the legal owner of the valuables.

Pawnbroking in the UK

Pawnbroking gained its first license in 1785 in London. Pawnbrokers paid a £10 fixed duty and pawn at 0.5% per month, with loans lasting as long as 1year. In 1800, with the influence of Lord Eldon (a Lawyer) interest rates increased to 1.6% per month and 20% per year.

Today, pawnbrokers pay an annual £7.50 and can loan as low as £5, with interest rates ranging from 5% to 12% per month, but most brokers offer loans at 8% per month. Loans can last as long as 6 to 7 months depending on the broker, with a 14 days grace period (after the expiry of the legal loan time) before the pawnbroker can sell the collateral. There is also a 14 days period (after signing the financial agreement) within which you are free to withdraw from the financial agreement.

Pawnbroking in the US

New York, Massachusetts, Boston, and Texas are popular for Pawnbroking. Pawnbrokers obtain a licence from Mayor and/or Alderman or Police Commissioner. They pay an annual $500 and must file surety bond of $10,000 with the Department of Consumers Affairs. The allowable interest rate varies from state to state, but the range is usually between 5% and 25% per month. Giving loans at higher interest rates is a Misdemeanor, punishable by law.

In the US, loans are usually written for at least 4 months, with an additional 30 days grace period during which the loan paid up or draw up a fresh agreement.

Pawnbroking rules may seem the same in most places, but there is usually a difference in the way (even if it’s slightly) the Pawnbroking business works.

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