Member Article

The New Face of UK’s Pawn-Broking

In today’s era of increased difficulty of access to traditional sources of credit, pawn broking offers a feasible and flexible alternative. In fact, pawn broking has purged itself from traditional taboos the industry was known for, and has come up as an option that carries lower risk and costs. This has also been substantiated by an independent assessment of the industry by BBC Radio 4’s MoneyBox programme.

The pawn broking industry of UK is worth £930m by size and is growing year on year. National Pawn-broking Association is the lead trade association that represents pawnbrokers. Members of NPA include the large chains to independent pawn brokers. As per a research untaken by NPA, it was found that currently only 3% of people use a pawnbroker, and a further 27% are extremely interested once they understand the process.

Pawn broking has changed from the old boy in his shop in the East End to online ventures that offer transparency and flexibility. With FCA now regulating pawn-broking along with banks, this industry is a part of overall credit industry.

Unbolted is one of the online pawn broking services that has combined the traditional model of raising money by pawing valuables with the modern concepts of peer-to-peer lending and benefits of internet. Unbolted has succeeded in reducing costs by eliminating middleman and using e-business model. These savings are passed on to the costumers and thus help them access loans at very competitive rates. While the monthly rate of major pawn-brokers for £4000 loan ranges from 5.00%-6.99%, that of Unbolted, including standard set-up fees over 6 months, is just 2.50%. The difference in APR for a similar loan from Unbolted and other major competitors is also huge.

The interest that one is supposed to pay for a loan from Unbolted is due only at the end, unlike other pawn-brokers who deduct it upfront.

One major issue that hinders public from pawning their valuable for raising a loan is the lack of transparency in valuation and concerns for safety of asset pawned. Unbolted has a very genuine valuation method and unlike others in the industry, it offers loan for around 80%-90% of the value of the asset. The entire process of sending the asset to be pawned to refund and reclaiming the asset is done through internet and absolute transparency is maintained at all stages.

Normally if a person fails to repay the loan amount, the ownership of asset pawned passes to the Pawnee and he/she has rights over the profit made from selling such asset. But Unbolted returns the surplus generated from selling the asset in case of default after deducting the loan amount.

The steps taken by NPA to promote pawn broking as an attractive credit option and start-ups like Unbolted are sure to fasten the growth of this upcoming industry in the UK. Practices started by Unbolted are sure to set standards in the industry and force others to improve their models thus helping the costumer in the search for liquidity.

This was posted in Bdaily's Members' News section by Steve James .