The cost of living crisis in the UK is forcing a growing number of people to take out loans against their possessions to cover bills, with the number of new loans from pawnbrokers rising by 25% in the past year, according to data from the Financial Conduct Authority. “These are my precious possessions that I’ve had to pawn because there’s no help, there’s no support’, said Clare Adams. Debt charity StepChange said the figures testify to the severity of the “cost-of-living crisis as people get desperate”.
Experts warned pawnbroking can exacerbate rather than alleviate poverty in the long term. However, following stricter controls on payday lenders, pawnbrokers are often the “only route for some people to get the money they need fast”, according to The BBC.
According to Nathan Finch, the managing director of Pickwick Jewellers and Pawnbroker in South East London, his company has seen business increase. “It’s interesting that it’s something that’s not affecting one class, we are seeing it from people who are very rich to less so”, said Finch. The FCA figures showed that £440m was lent out to pawnbrokers in the year to June, compared to £351m in the previous year.
Pawnbroking involves customers lending a possession to a broker for a fixed period of time, usually six months. The broker gives the customer between 50% and 60% of the item’s value as a cash loan which is paid back with interest of 7% to 8% every month. If the customer is unable to pay back the loan at the end of the contract, the pawnbroker sells the item and returns any surplus to the customer.
According to a report from 2012, over 350,000 people per annum rely on pawnbrokers for loans, with the National Pawnbroking Association suggesting that it was often the last option open to those without access to bank loans, aside from loan sharks
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