What is pawnbroking and how does it work?

Pawnbrokers can often be recognised by the three golden balls hanging outside their premises. A symbol since medieval times, it’s the emblem of St Nicholas, who according to legend, saved three girls from destitution by loaning them a bag of gold each.

It’s this premise of a loan that is at the heart of pawnbroking. The word ‘pawn’ comes from the Latin word ‘pignus’ meaning ‘pledge’. When pawning an item, you are pledging an item to the broker in return for a loan.

How does pawnbroking work?

The premise of pawnbroking has remained largely unchanged since it was brought over by the Normans in 1066. When someone requires money, an item is taken to a broker in exchange for the money.

The item is held for a pre-agreed length of time, and if the owner returns within the agreed time and pays back the loan plus interest, the item is returned to the original owner.

If the loan is not paid within the given time, the item is then sold – usually for a profit.

What are the advantages of pawn loans?

There are a number of advantages to taking out a pawn loan.

  • No credit checks: Unlike more traditional types of loans, pawning an item doesn’t require any credit checks. Pawnshops aren’t interested in finding out your credit score to see if you’re a credible asset to them. If you don’t pay them back, they have an item they can sell for more than the loan value.
  • Relatively lower interest rates: Whilst pawnshop loans have relatively high-interest rates, they are still often much cheaper than a payday loan, which can see individuals owning thousands of pounds. And because you’ve already paid collateral, if you can’t afford to pay back the loan, you won’t have anyone chasing you for money.
  • It’s fast: If you have an item that’s worth something and the brokers think they’ll be able to sell it on, you can get your cash quickly. Unlike bank loans and even payday loans where there are forms to fill in online, all you have to do for a pawn loan is find your nearest broker and choose what you’re willing to potentially sell.

Why do people use pawnbrokers?

Whilst pawnbrokers have been providing the poorest of society with a fast cash injection for centuries, today people are choosing pawnshops because they provide a quick and efficient way to exchange collateral with cash.

With the cost of living only increasing, many people are turning to pawn loans for a fast injection of cash. Whether it’s to pay for fuel, food, or to have some working capital, they offer people the chance to have cash, with the ability to get their stuff back.


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