Personal Loans

When is a Pawn Shop a Viable Option?


Ryan Ong



Pawn shops and poverty are like burgers and cheese; we have trouble dissociating one from the other. Many people consider walking into a pawn shop to be a low point in their life, right behind losing their job or admitting they’ve been to an Atomic Kitten concert. But that doesn’t have to be the case. Because of the way pawn shops work, they’re sometimes a decent option. I look into it:


How Do Singapore’s Pawn Shops Work?

Singapore’s pawn shops deal mostly in jewellery, watches, and gold. Sorry, you can’t cash in your old TV or Xbox (try Cash Converters for that).

The idea is that you turn in an item (known as a pledge) for money. You will get about 60 – 80% of market value for your pledge*. You then have six months to repay the money (at 1% interest on the first month, and 1.5% interest on subsequent months), before the pledge is auctioned off.

You don’t have to pay the full amount at once; you can pay in instalments, and each instalment extends the holding period for another six months.

*The amount you get for the pledge is determined by a valuation. This can vary radically based on the valuer’s decision.


What if You Fail to Pay in Six Months?


Smiling auctioneer
“SOLD, to that guy in the back. I knew they couldn’t see the superglue and duct tape from there.”


Your stuff gets sent to a pawnbrokers auction, where people bid for it.

The bid may result in a surplus. For example, you may have gotten $500 for a ring, but someone may have bid $700 for it. You would then receive the surplus of $200 (minus any incidental fees).

This combination of fast liquidity and easy repayment can be advantageous, if:

  • You Have a Cash Flow Issue
  • You Don’t Qualify for Credit Cards
  • You’re Afraid You Can’t Pay Back
  • You Have Trouble Selling


1. You Have a Cash Flow Issue


Empty notebook
Look closely at the pages of my notebook, boss. That’s the amount I’ve received from accounts.


Maybe a deadbeat client is paying you late. Or maybe your new job only starts in two months. Whatever the case, your problem isn’t that you don’t have money: It’s that you don’t have money now.

In which case, a pawn shop might be a viable option. You have up to six months for your money to arrive; that’s enough time to recover form major surgery, let alone raise $500 for a watch or something. If you can’t raise the money in that time frame, your issues go way beyond cash flow.

The downside is the interest you’re paying. Pawning starts to lose viability once you go beyond the six month stretch. If you’re paying 1.5% per month for a year, you may as well use a credit card.

Oh, unless you can’t get a credit card…


2. You Don’t Qualify for Credit Cards


Shredded Credit Card
“Yeah, there IS a card I could give you. Do you like puzzles?”


There are many reasons why you may not qualify for a credit card. But without going into them, I’ll just raise the ugly truth: If you can’t get a credit card, you probably can’t get unsecured loans, period.

To get a secured loan, you need collateral. Banks are happy to accept your car or house for that; but with rare exception, they won’t go around collecting watches and rings.

Shih Han, who once worked as an assistant in a pawn shop, says:

Many of our customers were foreigners, like students or people on work visa. They could not qualify for credit cards, as I believe foreigners must have a higher income than locals to qualify. 

For these people, I believe the pawn shop is very helpful. And personally I would like to say the system is more friendly than credit card loan.”

Oh yeah? And why’s that?


3. You’re Afraid You Can’t Pay Back


World's First Snowboarder Hotel
I can pay it back if my business takes off. It’s in Saudi Arabia.


Do you know what happens if you don’t pay your credit card debt? The bank will introduce measures that make Jigsaw look like a wuss.

The consequences of losing a pledge are less severe. Shih Han explains:

If you feel there is a risk you cannot pay, I would say it’s better to pawn. If you pawn, worst comes to worst, you lose the pledge. It may be very painful, but you just compare it to how a bank will treat you.

If you fail to pay your credit card, there is no end to it. They will keep on compounding your interest, until you lose property that is several times the amount of the original debt. 

At least with pawnbrokers, you just lose the pledge and that is the end of it.”

But Shih Han adds a caveat:

“You pawn if you are uncertain whether you can pay back. If you know for sure you cannot pay back, then please go and sell instead. Most probably, you sell to a jeweller or watch dealer, you will make more money.”


4. You Have Trouble Selling


Vegetable market
“You can’t sell an Omega Spacemaster watch?! Where have you been trying to sell it?”


Eh, but Shih Han, no one wants to buy my watch.

What’s that? Because it’s a plastic Casio with ‘Rolex’ misspelled in red marker? It’s one of a kind limited edition!

Well it was worth a shot, because Shih Han claims pawnbrokers are a last resort for sellers.

“Pawnbrokers give you less money for your things. You ask them, many of them will also tell you the same. This is just being honest. But if you have trouble selling at watch or jewellery shops, I think the pawnshop is faster than the newspaper or Internet.

If you have time, please try to visit proper shops and negotiate for the highest selling price. But if things are urgent, as a last resort, the pawn shop is there for you.”

Image Credits:
生活童話, Irish Philadelphia Essays, middlekidd, vitamindave, igb, hamron

Have you ever used a pawn chop? Comment and let us know!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.