You would have had the thought of pawning an item of certain value at one time of your life. This usually occurs when you have an emergency and is currently in need of some cash but has no where to turn to.
Better than loans?
In some ways, pawning, sometimes referred to as pawnshop loan could be an alternative to applying for a loan. When you find yourself being in a situation and tight for cash, you realize that going through the standard procedures might not be such a viable option after all.
This is because banks might have interest rate which is too high and you might not be able to get an approval, while borrowing from money lenders might be too expensive. Pawning should be an option only if you need some quick cash but you do not want to get into any form of trouble.
Pawnshops in Singapore
Singapore, like other countries around the region has a lot of pawnshops. Do not be mistaken or confused with licensed money lenders although some might claim to offer both services. In fact, pawnbrokers in Singapore are regulated and must be registered. There are more than 200 licensed pawnbrokers who are registered with the Ministry of Law of Singapore.
How does it work?
Make no mistake about it, pawning means you need to accept 2 things.
- You might not see the valuable item ever again
- You might be able to ‘buy’ it back after 6 months or so
What makes pawning so interesting is that the process is simple and quick. In fact, it is the easiest and fastest way to get cash (or borrow it).
A temporary loan
For starters, it is very easy to work with pawnbrokers. The process is as simple as it comes. You have a valuable item, you bring it to them. Then, they will sort of take it from there. The pawnbroker will then carry out an evaluation of your item. If the price is agreeable, then they will give you the cash. For example, if you bring a gold ring to them which you bought for SGD 2,000, they might value it at SGD1,500. Once you think that price is okay, then they will give you the cash. You can usually expect an average of 75% of the original value when you pawn an item. That is how the ‘interest’ is earned.
Very important advice
What you want to know really is that you are not borrowing money from them. In fact, you are not even selling your item to them. Selling your item is a choice you can make or decide later. When you pawn an item, you are passing your item to the pawnbroker for safekeeping. So, when you have the money in 6 months, you can actually get your item back. But if you think you want to keep the money, then that would be the ‘selling’ price.
On the other hand, you can actually pay them back in fractions. You can choose to pay a small amount to the pawnbroker. This will then ‘reset’ the 6 months until you fully pay back. If you fail to pay back the amount in 6 months or a period agreed, then it is up to the discretion of the pawnbroker to do whatever they choose with your item.
Why should you consider pawning?
What you want to get out of pawning is quick access to cash. Unlike applying for a loan from the bank, there is really no need for documentation or long processes. You will only need to bring the valuable item and you are ready to go. After that, you will get instant cash without any red tapes or procedures. A pawn receipt will then be issued to you. This is the document that you need to produce, together with the amount agreed to get your item back.
At the end of the day, getting a pawnshop loan is a great option if you have such items that you do not need or that you can forego because their value is actually the best collateral.