For a very long time, Singaporeans and even other people associated pawnshops with poverty. However, with time, people have come to accept pawnshops as a part of the money lending industry. They come in handy when someone is in a financial crunch and in need of easy to access money. Before you approach a pawnshop Singapore lender, you need to understand the business and a few things related to it. Here is what you need to know about Singaporean pawnshops.
How Do They Work?
Pawn shops provide short-term loans against collateral. The collateral can be any valuable item. Once you pledge the collateral, the pawnshop lends you money in return normally 60% – 80% of the market value of the pledged collateral. The market value of the collateral is determined by the pawn shop’s valuer. The repayment period is about six months after which the pawn shop can decide to auction the pledged collateral in case you fail to repay the debt. Each time you make an installment, your repayment period is extended by six months. Pawn shops calculate their interest on a monthly basis. As such, you are better of letting go of the pledge if you are unable to pay for more than six months.
When is it Ideal to Use a Pawnshops?
Because of the convenience and ease of obtaining cash offered by pawnshops, their interest rates are normally higher than those of traditional lenders. Pawnshops are ideal if you are in a financial crunch and you do not have a good credit score. This is because traditional money lenders will require you to build your credit score before they can lend you money.
Pawnshops are also ideal for cases where you need money, but you are uncertain about repayment. This is because the collateral you pledged is all you have to lose if you are unable to make repayments. On the other hand, traditional lenders would compound and accumulate your interest if you are unable to pay, which can leave you in a financial mess.
How Do Pawnshops Make Money?
Pawnshops charge interest. Therefore, you can’t redeem collateral at the same value you pledged it. The sooner you redeem the collateral pledged the interest you pay.
However, most pawnshops in Singapore charge interest of below 2% per month, which is below the average for a credit card. However, the interest of pawnshops is higher than that of personal loans.
What do Pawnshops Do With Auction Surplus?
This might surprise you, but Singaporean pawnshops give the defaulter the surplus after the auction. Assuming you had pledged collateral worth $400 and you were unable to make any repayment then the item is auctioned at $500, the pawn shop gives you the extra $100 less accumulated interest and fees.
Are Pawnshops Authorized?
Yes, pawnshops are authorized, and they have to comply with set rules and regulations. When looking for a pawnshop, ensure that you choose one who is licensed.
This understanding of pawnshops business will enlighten you on what to expect from pawnshops and also guide you in choosing the right pawnshop for your financial needs.…