Not many people benefit from the credit crunch; the pawnbrokers do

You would be excused for thinking that while the nation is hit by the credit crunch, everyone in the country is struggling. A fair assumption it may be, but an incorrect one it is.

While hard working Mr and Mrs Smith are struggling to pay their bills each month, their mortgage payments continue to creep up and finding money becomes harder and harder. Enter the pawnbroker. More and more of us are turning to the pawn shops as a method of supplementing our incomes.

For years credit has been freely available and we have accepted it without a second thought. We have taken out loans to buy TVs, DVD players, jewellery, games and other goods with value that we simply would not be able to buy today. So it makes sense that in times of hardship, we turn these goods into cash and short of selling them, pawning them is the next best thing.

Another industry which is booming at present is that of pay day loans but if you consider the cost of borrowing on these, you will see pawning your stuff can be a lot cheaper. Most pay day loan firms charge in the region of £20 for every £100 borrowed. In contrast, you could easily find a pawnbroker who would offer you a loan against your goods for somewhere in the region 8% or £8 for every £100 borrowed. Talking of pawn broking as a means to raise funds, Chris Tapp, director of debt charity Credit Action said “If you need a small amount of cash for a short time, like if your boiler breaks down, it can be a decent option”.

As with all credit, you should think seriously before entering into any agreement and if you cannot afford to buy the goods back in the short term, this probably isn’t for you as the fees will continue to build each month and the debt can escalate.

Before pawning, consider the alternatives. It is still an expensive way to borrow and if you find yourself pawning things on a regular basis, you need to find a more workable solution to your financial situation because it can be a vicious cycle that gets harder and harder to break.