What Are Pawnshops?
In ancient China, 3,000 years ago, pawnbrokers introduced the concept of pawnshops to peasants as a way to offer short-term credits. Pawnshops became a trend in Greece and Rome, and many citizens began to embrace them until they became mainstream.
However, in the Middle Ages, the Catholic Church imposed limits on pawnshops because pawnbrokers charged exorbitant interest rates. Pawnbrokers later proved that this practice is a viable way to access funds to address start-up businesses’ needs and serve as financial aid to the poor.
In 1896, the first pawnshops emerged in the Philippines when Doña Filomena Concepcion de Tan Bunting realized her dream of opening a pawnshop and built Agencia de Empeños, which was considered the first private lending institution in the country. As the only lending institution, it quickly grew and attracted more patrons.
Over the years, pawnshops have evolved into what they are now and have dominated the Philippine market offering various services, including money transfers, bills payment, prepaid top-ups, and quick cash loans, to name a few.
Pawnshops Business Model
When people look for immediate cash financing with less documentation, they can apply for a loan from loan sharks or pawnshops. Of the two choices, the latter is still a better option because it’s legal and has reasonable loan terms. The borrower applying for a quick cash loan will only consider the collateral required for the transaction.
Pawnshops make money through the interest charged on the collateral. When the borrower brings valuable items, the personnel from the pawnshops appraises their value and decides the amount they can loan to the borrower.
The interest amount charged to the borrower is from 3% to 4% per month of the loan amount. The loan tenure is up to three months, and it’s renewable. Upon due date, the borrower pays for all the interest charges accrued, and when he’s ready to redeem the pawned item, he pays the loan amount and the accumulated interest to date.
In general, pawnshops prefer jewelry as pawnable items, but now they also accept a wide range of items, including gadgets, appliances, electronics, and even cars.
Why Should You Consider Using Pawnshops?
Pawnshops are the best option for people who need immediate funds, but they lack the required documentation for loan processing. Here are some of the advantages when you apply for a loan using pawnshops:
They Provide Instant Cash Access
Traditional banks can’t provide immediate cash to borrowers who lack the proper documentation. In contrast, pawnshops can give borrowers instant cash on the spot in exchange for valuable items as collateral, and the loan amount is equivalent to the appraised value of the items.
Easy and Fast Process
Borrowers only need to present the pawned items and one valid government-issued ID. The pawnshop personnel appraises the pawned items and provides the borrowers with the amount they can receive. If the borrowers agree to the price, they will receive cash and sign the terms and agreement of the loan. This process is straightforward and will only take a few minutes.
A Good Credit History is Not Required
Pawnshops don’t require a credit check when borrowers apply for a loan because the cash they receive will depend on the value of the pawned item. If he can’t pay or redeem the item once the loan term expires, the pawnshop has the right to do whatever it pleases with the pawned item.
All Transactions are Legal and Safe
The pawnshops in the country are regulated by the Bangko Sentral ng Pilipinas (BSP) and operate legally. They comply with the regulations by charging reasonable rates and imposing realistic terms and conditions. Additionally, they can’t share customers’ personal information with third-party companies.
When Should You Consider Pawnshop Services?
Some circumstances warrant a person to resort to pawnshop services for quick loans instead of going to banks or other financing companies. For the most part, these are due to the following reasons:
Emergency Need for Cash
When the savings are insufficient to cover the emergencies such as hospitalization, some people will opt for quick cash loans to settle hospital bills and other medical fees. For example, a family member admitted to a private hospital must pay for the downpayment and additional admission fees. Banks can only release loan proceeds for a couple of days, whereas pawnshops can give you the money on the spot.
People hit by calamities need immediate funds to fix their homes and restart their businesses. Quick cash loans from pawn shops can be their option, too. Typhoons and other natural disasters often leave destruction in poverty-stricken areas, and recovery starts when there’s access to funds to buy raw materials for the reconstruction of houses and other establishments.
Unemployed and Lack Requirements
Those who have recently lost their jobs or do not meet the minimum salary requirements to avail of a loan will find themselves in a predicament, especially when submitting the required documents. Pawnshops can remedy this problem, and although the borrowers need their valuable possession, necessity will push them to take a loan with pawnshops instead. They rest in knowing they can redeem their item once they have the money.
Retrenched employees aren’t exempted from facing financial emergencies. The only option they have is to borrow money from loan sharks and pay high-interest rates or choose pawnshops and transact legally.
Bad Credit History
Bad credit history will likely affect the borrower’s chance of getting his loan approved, especially in banks and other financial institutions. When borrowers apply for a loan, a credit check is a must regardless of the circumstances. Bad credit history will lead to the rejection of the loan application of the borrower.
Short-Term Need for a Loan
The terms usually stated in a quick loan through pawning are only for a short-term period. In general, pawnshops offer three months loan tenure, and the borrowers have the option to extend their loan as long as they pay for the interest due.
Items for Collateral for a Pawnshop Loan
When pawnshops first conducted their operations, most items received as collateral were jewelry because of their high value. Over time, the list of acceptable pawning items has been expanded, and borrowers have other options such as:
- Gold
- Diamond
- Platinum jewelry and watches
- Cellphones
- Laptop computers
- Car Title or OR/CR
- Land Title
- Luxury Items
- Appliances
- Artwork
Some items that depreciate fast, such as gadgets, cellphones, appliances, and other electronic devices, will have a lower appraisal value. Jewelry, OR/CR of vehicles, artwork, and land title will have a higher appraisal value.
Loan Process Through a Pawnshop
The loan process throughout all the pawnshops in the Philippines is more or less the same. Borrowers must bring the item they want to pawn, a valid government-issued ID, and visit the nearest pawnshop, and they need to wait for the pawnshop personnel to facilitate the transaction.
Borrowers who present the collateral for appraisal must fill out a form with their personal information. Once the personnel from the pawnshop completes the assessment, he will inform the borrowers of the appraised value equivalent to the loan proceeds, the interest rate, and the loan term.
The borrowers receive the net proceeds of the loan. Therefore, the pawnshops will deduct the processing fees (and in some pawnshops), including the first month’s interest. Within the loan duration, the borrowers can claim the pawned item and pay for the loan amount plus any accrued interest or extend the term of the loan and pay only for the interest due.
If the borrowers are ready to redeem the item, they only need to bring the pawn ticket, a valid government-issued ID, and the cash for the full payment.
Online Pawning
Not everyone feels comfortable visiting pawnshops and carrying their items, and some are too heavy and impossible to bring to pawnshops for appraisal. That’s why some pawnshops have developed a way of making online pawning possible.
As the name suggests, online pawning is entirely online, and a person will only need a laptop or smartphone to get started. One can visit any of the online pawnshops available in the Philippines and create an account.
Next, an online pawn ticket must be created detailing the information related to the pawned item and schedule a pick-up for the item. Within 24 hours, personnel from the pawnshop will pick up the item for an appraisal. Once done, the borrower will receive the loan agreement with the terms.
After the borrower accepts the offer, he or she can cash out the loan proceeds through any of these methods: bank transfer or any InstaPay and PESONet partner banks and electronic money issuers.
List of Pawnshops in the Philippines
There are many pawnshops in the Philippines today – some more well-known than others. However, those that have already been around the country for decades are still the most trusted and preferred establishments today.
Name Of Pawnshop | Acceptable Items | Interest Rate | Service Fee |
Cebuana Lhuillier (available nationwide) |
| 4% | ₱5.00 |
M Lhuillier (available nationwide) |
| Starts at 3% | ₱5.00 |
Palawan Pawnshop (available nationwide) |
| 1% to 3.5% | one percent (1%) of the principal loan, but shall not exceed five pesos (₱5.00) |
RD Pawnshop (available nationwide) |
| 3% | one percent (1%) of the principal loan, but shall not exceed five pesos (₱5.00) |
Tambunting Pawnshop (available nationwide) |
| 4% | none |
PawnHero (available nationwide) |
| Gold and Jewelry – 3.5% or ₱500 whichever is higher Designer bags, luxury watches, gadgets, and other items – 4.99% or ₱500 whichever is higher | one percent (1%) of the principal loan, but shall not exceed five pesos (₱5.00) |
Villarica Pawnshop (available nationwide) |
| 4% – 6% | none |
N-Cash (Only available in Greater Manila Area) |
| 3% – 10% | 1% of the principal amount |
CVM Pawnshops (available nationwide) |
| Jewelry – 3.5% Cellphone – 10% Gadgets – 15% Smart TV – 15% | Not available |
Dalton Pawnshop & Jewelry, Inc. |
| 2% – 5% | Not available |
M. B. Aguirre Pawnshop (available only in Metro Manila) |
| 3% | Not available |
GRJ JARO Pawnshop CORP. |
| Not available | Not available |
Ros-Ver Pag-Asa Pawnshop (available in Davao) |
| 5% – jewelry, watches cellphone 6% – bulky items (appliances, power tools, computer, etc.) | one percent (1%) of the principal loan, but not exceeding five pesos (P5.00) |
PTS Gadget Pawnshop (available in Metro Manila) |
| 3% – 6% | one percent (1%) of the principal loan |
The general requirements needed at any of these pawn shops to pawn an item are a valid government-issued ID, an active mobile number, and a completely filled-out form.
The table above shows that jewelry has a lower interest rate than other valuable items. Some pawnshops in the Philippines do not just function as pawnbrokers but also offer other services such as remittance, money transfer, bills payments, currency exchange, etc.
General Requirements and Documents Needed for a Pawnshop Loan
When the borrower is ready to get a quick cash loan from pawnshops, there is no need to prepare a long list of documents to get approved. He must bring the following:
- A valid government-issued ID
- Pawned Item(s)
- Active mobile phone number
These three requirements are what make pawnshops an easy way for people to come up with the needed cash – the requirements are straightforward and simple. When a person has a valuable item for collateral, he or she may be granted a quick cash loan in a few minutes, provided that the pawnshop accepts the collateral.
Most pawnshops have websites that contain a full list of accepted items. It is always better for a person to know what the pawnshop accepts as collateral before visiting them.
Tips for a Pawnshop User
Those who are interested in pawning a valuable item in exchange for a quick cash loan must understand the processes and costs involved in pawning. As with all types of financing, borrowing money has a cost attached to it.
Know How a Pawnshop Works
When pawning an item or items, the person in need of a quick cash loan must understand the whole process of how a pawn shop works. Essentially, a pawn shop is the same as financing companies and banks by making money through the interest charged. However, the terms and conditions will differ. Hence, it is essential that all questions related to interest rates, penalties, loan renewal or extension, and even claiming the pawned item have to be asked first prior to signing anything.
Understand That a Cash Loan From Pawnshops Is Only for Short-term
Pawnshops charge daily interest on the loan amount received. This means that when the borrower foresees that he or she will not be able to make a payment within a three-month to a 12-month period, the interest payments will definitely hurt the borrower significantly if the loan value increases.
One must always assess the cost of borrowing especially when the interest accumulates. Some people sometimes resort to loan renewals by paying for the total accrued interest at maturity. Over time, when a person constantly has to pay for interest, it becomes more expensive than applying for a loan through a bank.
The Appraisal Value Will Not Be Equal to the Purchase Price of the Item
The cash proceeds received will be based on the appraisal of the pawned item. Some items are more valuable than others. Those who pawn electronic devices and appliances will receive a lower appraisal value as compared to jewelry and other luxury items because it depreciates faster and loses their value in the long run.
Other factors are also checked during the appraisal, including the condition of the item pawned and its ability to be sold. If these conditions are barely met, a person will only be able to get a small amount of loan.
Not All Valuable Items are Accepted
Pawnshops have a list of pawned items that they can accept. Just because a person views his or her valuable item as having “value”, the assessment from pawnshops may not be the same. It is always better for a person to check the list of acceptable items of a pawnshop first before bringing their item to the shop.
A typical case would be a newly bought gadget compared to jewelry. Jewelry – especially precious metals – typically have a higher appraisal value even if the purchase price of the gadget is higher than the jewelry.
Fake Items Brought to Pawnshops
Some people, desperate to take a loan, would resort to bringing fake items to pawnshops. And although most pawnshops have fool-proof ways of identifying fake items, there are instances when some items look real and are able to pass and get appraised.
If the borrower must not intentionally bring fake items as collateral because the pawnshop will block him or her from conducting business with the shop due to trust issues. If later on, the pawnshop discovers that the item is fake, immediate payment will be due from the loan, or in worst-case scenarios, a case will be filed against the person if the shop finds out that the person deliberately fooled the pawnshop.
Some people believe that their item could be valuable but later on find out that it is not, especially in the case of heirlooms. Although some items could have been passed down from generation to generation, their worth doesn’t guarantee a higher appraisal.
A typical scenario of how item owners and pawnshop personnel spot fake items can be seen here.
Frequently asked questions
Why is there a need to test my item during pawning?
What is a pawnshop?
Which pawnshop has the highest appraisal?
What pawnshop accepts watches?
How to start a pawnshop business in the Philippines?
How do pawn shops appraise jewelry?
What pawnshop accept silver?
How do pawnshops appraise gold?
Can I still renew or redeem my item even if I lost my pawn ticket?
Are my pawned items safe while being in a pawnshop?
What happens to a foreclosed item?
Can anyone redeem the item on behalf of the pawner?
How will I get my money after pawning an item?
How do I redeem my pawned item?
Can I extend my loan?
Conclusion
Pawnshops have become a crucial part of every Filipino’s life when they meet financial difficulties that need to be addressed immediately. And while many avoid pawnshops due to the high-interest rates they charge and the short loan terms, they provide the easiest and simplest way for people to have immediate access to cash to take care of pressing matters – especially medical emergencies.
Before one starts using pawn shops for their financial needs, they must first understand how the entire process works and the cost that people have to anticipate regarding their pawned item.