Personal Finance
Pawnshop 101: What You Need to Know?
September 19, 2021
When you need some quick cash, a pawnshop can solve that issue immediately!
But in the past, Singaporeans had some prejudice regarding this matter. If they saw you visiting a pawnshop, they would just assume that you’re bankrupt!
Those days are gone now, and people have accepted it as a part of the loaning system. So if you go for pawning now, nobody really cares!
However, there’re some tricks you need to know; one cannot just go and grab money from there! And to inform you about the process, here’s our ultimate Pawnshop 101 guide and what you need to know.
So without wasting much time, let’s get into that part right away!
How Do Singaporean Pawnshops Work?
There are plenty of ways to source cash in Singapore, such as getting short-term loans and applying for credit cards. But among all, pawning is one of the most popular ways. But how does a Singaporean pawnshop work?
First of all, you need to pledge a valuable item to the shop. For instance, you can take your gold, jewelry, electronics, or any high-end possession. Even your designer purses will do the job pretty smoothly!
After pledging these items, the pawnshop owner will evaluate your valuables. When they are done with the calculation, they might pay you up to 80% of the total value of your possessions.
For example, if you pledge a diamond ring worth 12,000 bucks, the shop owner will lend you at least 8000 bucks.
Now, let’s talk about the interest. The shop will grant you six months to repay the loan. The interest rate will be 1% for the first month and 1.5% for the next 5 months. And the most amazing thing is, once you pay one installment, you will have another 6-month deadline!
However, if six months pass and you fail to pay any amount, your items will be auctioned. Well, that’s a bummer!
Pawnshop 101 – Things You Need to Know
In the past, pawnshops were a whisper! But these days, anyone can go to this place for loans and shopping without raising any suspicion. Now a day, a pawnshop looks nothing different than any jewelry shop!
However, if you want to finish pawning with success, you need to know some factors for a better experience.
It’s a Good Option When You Can’t Make Repayments
If you are in a bad position and don’t have any idea that you can repay your debt or not, pawnshops are the best option for you.
When you lend money from this shop, you will get a six-month installment choice. Though they will charge you interest, your items will be sold after six months if you fail to pay anything. And the shop owner won’t bother you for the interest ever again!
On the other hand, you will have to pay the full payment with interest when you load your money from any organization. There’s no other option. Until you’re clearing the debt, they will keep charging you the interest!
So if you’re uncertain about your cash flow and unsure if you can repay or not, you should go to a pawnshop. It will be the easy way out, don’t you think?
Pawnshop Charges Interest
After pledging something to the pawnshop, you can’t get it back for the same price. You have to pay the interest, which isn’t surprising at all.
The interest for the first amount will be 1%, and for the other months, the rate will be 1.5%. And the more you keep delaying, the more money you’ll have to pay!
However, a pawnshop’s interest rate is still lower than any credit card, up to 2% a month. Considering that pawnshops are a money saver!
Pawnshop Interests Are Higher Than Personal Loans
Though pawnshops offer a lower rate of interest than credit cards, you can get personal loans with a lesser amount of interest. Yes, banks are offering loans with just a 1% interest rate.
However, lending money from banks is a pretty lengthy process. So if you want instant help, a pawnshop will be your savior!
Don’t Liquidate Your Valuables Through Pawn Shops
Pawnshops do not see your credit history before lending you money. All they do is evaluate your possession and pay you according to that immediately! And if you go to a licensed moneylender in Singapore, the procedure will be time-consuming!
But no matter how straightforward it seems, you shouldn’t liquidate your assets through a pawnshop as they’ll pay you only 80% of the actual value! And that’s a total rip-off.
Hence, you should sell your items to a collector or someone who will pay you the full amount. If you don’t have any attachment to your belongings, you can try this for a better experience!
Pawnshops Require Fewer Documents
If you go to a pawnshop to lend money, they don’t really need much to accept your application! All you need to bring are the items you want to pledge and your identity proof. And you will get your money in no time!
On the other hand, banks and money lending organizations will keep asking you for details and documentation. They will demand identity proof, a minimum income, CPF documents, and so on!
Furthermore, if you have a bad credit history, your loan will never be approved! Are you ready to go through that ordeal?
If not, go to a pawnshop and show your assets to them. You will get your money without any delay!
You’ll Receive Leftover Cash After Your Item Gets Auctioned
One of the best things about the pawnshop is, you will get any surplus cash if your item gets sold in an auction. Suppose the owner has sold your items more than the money he lends you. So if the assets get sold at a greater price, the owner will hand you over the extra cash after deducting the interest and fees.
The Pawnshop law in Singapore doesn’t allow the owner to keep the extra cash. So even if you lose your asset, you will be well-compensated.
Pawnshop Is an Excellent Place to Buy Gold
If you want to buy gold or any other valuable jewelry, the pawnshops are the an excellent place to go. These shops have a huge collection of second-hand gold that you can buy within a reasonable price range.
Advantages and Disadvantages of a Pawnshop
Everything in this universe comes with perks and cons, and pawnshops aren’t any different. So before you walk into this place, here is the list of advantages and disadvantages of these shops. It will help you to keep your head clear when you enter the site.
Advantages of a Pawnshop
- Quick and Easy Cash
When you need immediate money and can’t think of any resort, a pawn shop is the best idea at that moment. You don’t have to submit tons of documents, and you’re getting a pretty fair deal. And that’s all we need!
- Minimum Restrictions
If you go to a pawnshop, they won’t ask you for a minimum income or any job information. The shop will only ask for legit identity proof and evaluate your asset. That’s it; your loan will be approved instantly!
- No Credit Rating
Pawnshops don’t care about your credit history. But if you go to a bank, your full approval depends on it. So if you have a bad credit record, a pawnshop will be your best buddy!
- No Long-Term Technicality
If you can’t repay your loan in six months, your items will be auctioned, and the pawnshop won’t bother you with anything! On top of everything, you will get surplus cash when the asset is sold at a higher price. And that’s pretty remarkable.
Disadvantages of a Pawnshop
- Higher Interest Rate
The interest rates of pawnshops are a bit higher than the personal loans in Singapore. So if you don’t have a bad credit record and are not in a hurry, you should think about applying for a loan.
- Lower Loan Amount
You will get only 60%-80% of the actual value when you pledge your possession to the pawnshop. And sometimes, this amount isn’t enough to solve your problems. Moreover, the shop owners tend to offer you a lower amount than the actual price, which is quite disappointing, to be honest!
What Pawnshops Do and Don’t Want?
You can’t just walk in with anything and expect the best outcome from the shop! Here is the list of some things that the shop owners like and dislikes. If you keep this in mind, you will have a satisfactory experience.
Things to Pledge in a Pawnshop
- Jewelry
- Gold
- Coins
- Firearms
- High-quality tools
- High-end electronics
- Designer items
- Musical instruments
Things Not to Pledge in a Pawnshop
- Anything outdated
- Cheaply made objects
The Bottom Line
Pawning items is a bit tricky; there are lots of things to consider! But it is a great option when you need some fast cash! Trust me, when it’s about money, you are less likely to get help, even from your dear one!
Hopefully, after reading this Pawnshop 101 guide will help you to pledge your items con and get a loan without any trouble. Just keep your head clear, and you will have the best results, don’t worry!
