Pawning is nothing to be ashamed of - these days brokers look more like banks and it's a hassle free way of gaining credit without more debt. Alison Brace tells you everything you need to know.Pawnbroking may seem a tad Dickensian, summoning up images of desperate mothers furtively exchanging Father's Sunday Best in backstreet rooms for a paltry amount of cash to feed hungry mouths.
In fact, in 21st-century Britain, there are nearly 1,000 pawn shops across the country - and they are steadily emerging from the shadows.
Harvey and Thompson Group, Britain's second biggest pawnbrokers, is set to expand its 83-branch chain to 250 and is in the process of moving the pawnbroking business from the back of the shop to the front.
Bristol-based Albemarle and Bond, the UK's largest chain, has also boosted its network of stores from 86 to 112 with the acquisition this summer of the country's third largest group of pawnbrokers, Leeds-based Herbert Brown Son. "Pawnbroking is a modern way of doing business," says John Nichols, chief executive of HT Group and president of the National Pawnbrokers Association.
"There's nothing to be ashamed of. It's not that much different from going into your building society and saying you want to raise some money against the value of your house."
For that reason, a pawnbroker's store is now more likely to look like a branch of a bank - with a jewellery shop window. Most also offer a range of financial services, such as pay day advances and a facility to cash cheques. All loans are regulated by the Consumer Credit Act.
So how does it work? Well, most pawnbrokers deal in jewellery, with some specialising in other luxury goods, such as cars. Your item is valued by a pawnbroker, who then offers a six-month loan on it.
If you repay the loan, you redeem your item and if you don't, it is sold at auction. If it makes more at auction than it was originally valued at, then the pawnbroker has to pay you the difference. The important thing is to pay off the loan as quickly as possible.
Contrary to popular belief, the majority of people do redeem their goods and the average life of a loan is about three months. However, depending on the pawnbroker, you will pay about 6 to 8 per cent interest a month. A hefty rate, yes, but a hassle-free way of gaining credit without plunging you into further debt.
And instead of grubby notes being thrust into your hands, there is now the option, at HT at least, to have your cash loaded on to a plastic card.
"The difference between taking out a loan or pawning an item is that people do not get into debt over it," says John.
As banks get choosier about whom they lend money to, financial market commentators believe business for pawnbrokers is likely to go from strength to strength.
Research in 2003 by Professor Elaine Kempson of Bristol University's personal finance unit suggests that pawning goods in return for short-term loans helps many families control their cash flow. "Pawnbrokers have come of age and have become accepted as financial providers rather than backstreet boys," she says.
It's worth remembering, too, that pawnbroking sprang from the same roots as banking in 15th-century Italy, when the Medicis established themselves as a family of bankers and lenders. The pawnbroker's trademark three gold balls is in fact a detail from the Medici family's coat of arms.
Pawnbroking's heyday in Britain was in the 19th century through till the outbreak of the Second World War, when there were still as many pawnbrokers as pubs.
Today, as the credit crunch begins to bite, perhaps pawnbrokers could be seeing the dawn of a new heyday