Pop goes the weasel

Pawn shops still carry a Dickensian image of mother pawning father's best suit for a paltry sum - but they are thriving in 21st Century Britain.

And with banks and credit card firms becoming more choosy about whom they lend to as the credit crunch intensifies, pawnbrokers are filling the gap.

Compared with other forms of credit on offer to people on modest incomes, such as pay-day loans and doorstep lending, pawnbroking can be a ready source of cash at a lower cost.

Three million or so Britons do not have bank accounts, while many more find it hard to get credit cards and overdrafts because of poor credit ratings.

In the late 1800s, there were almost as many pawnbrokers in Britain as pubs, but this number dwindled after World War II - a time of high job security and the advent of the welfare state.

The Consumer Credit Act of 1974, which modernised the 1872 Pawnbrokers Act, paved the way for the revival of the trade during the 1980s credit boom and subsequent economic downturn in the early 1990s.

According to the National Pawnbrokers Association (NPA), there are about 800 pawnbrokers in the UK - and this number is growing at 10% a year.

"Many people don't know how it works and once they realise that a pawnbroker is not trying to keep their things and flog them, they are more willing to give it a go," says Des Milligan, head of the NPA.

"Today, most pawnbrokers only lend money against gold and diamond jewellery - electronics lose value too quickly as new brands come in."

"If you need a small amount of cash for a short time, like if your boiler breaks down, it can be a decent option," says Chris Tapp, director of debt charity Credit Action.

Pay-day loans, which are also becoming more popular as the economy slows, charge £20 to £25 on every £100 borrowed - an APR of more than 1,000%.

Rates of interest vary little across the industry, with most pawnbrokers charging 8% a month - £8 on a £100 loan. "It's less than going into an unauthorised overdraft in the short-term," Mr Milligan says.

More than 80% of customers come back to claim the items they have pawned. "We make our money on the interest charged. It's not about acquiring goods cheaply," says Mr Finch at Pickwick Pawnbrokers.

* Pawnbrokers typically lend up to 50% of an item's value

* Typical interest rate of 7-8% a month

(BBC)