Christmas

Pawnbrokers: When the money is missing for the festive season

The option of a pawn loan is increasingly used, especially around the festive season.

(Bild: stock.adobe.com/lesslemon)

Pawn shops are in high season during the Christmas period. More and more Vorarlberg residents are also taking advantage of the quick cash offer. But this does not solve the fundamental problems. 

Loved ones want presents, a festive meal needs to be put on the table - Christmas is not only a time of joy, but also of consumption. If you overdo it or want to spend more than you have, you can quickly run out of money - which is why installment and credit card payments are booming at Christmas.

More and more Vorarlberg residents are also taking advantage of the opportunity to get money from pawnbrokers. Jewelry, watches, gold coins, a smartphone or other technical devices can temporarily fill the empty space in your wallet with cash. "We generally see an increase around Christmas, as many of our customers use a pawn loan to bridge the gap," reports Michael Holubowsky from Dorotheum Pawnbrokers, which also has a branch in Messepark in Dornbirn.

Cash in hand within a few minutes
According to the report, the pawnshop in Vorarlberg records an increase in customers of around ten percent at Christmas. There are several reasons why Dorotheum customers opt for a pawn loan rather than a bank loan or other financing options, says Holubowsky: "The account may already be debited.

A pawn loan is also unbureaucratic - you only need to provide proof of identity and be 18 years old, and you also have to complete an insolvency check and prove that the item being pawned is the property of the pawnbroker. Five minutes later, you have the cash in your hands or in your account." On average, loans of around 800 euros are obtained for jewelry, according to Holubowsky.

There is generally an increase around Christmas time, as many of our customers use a pawn loan for a short bridging period.

Michael Holubowsky, Dorotheum

Bild: Dorotheum/Thomas Schwentner

How much money you get for what varies from pawnbroker to pawnbroker. At Dorotheum in Dornbirn, a loan of between 40 and 60 percent of the current value is granted for technical equipment - depending on the model and brand.

Various factors are decisive in determining a jewelry pawn: purity, condition, material value, weight and so on. The loan amounts to between 60 and 80 percent of the realizable value. The term depends on the type of loan. However, there is usually up to five months to redeem the pledge - or to extend the term again if necessary.

According to Holubowsky, the repayment rate is high. Around 90 percent of customers would pick up their pledged items again. "As our financial service is an additional product on the financial market and is used for short-term bridging of financial bottlenecks, the pledged loans are often repaid with upcoming payments such as Christmas and vacation bonuses."

Most people redeem their valuables
Cash in and go - but it's not that simple. There are certain framework conditions that need to be observed. "Of course, we point out our interest and fees." Interest of 0.5 percent per half month is charged on the loan, as well as 1.25 percent in fees for the valuation, safekeeping and secure storage of the valuables. There is also a fee for issuing the pawn ticket.

Customers have five months to redeem their items. However, this period can be extended again. "You only have to pay the interest and fees incurred beforehand and then you have another five months to pay off the loan." The average pledge period is around three months.

If someone is unable or unwilling to repay the pledge, the item is auctioned off or liquidated by a jeweler. Debt advisors are generally critical of pawn loans. However, as the loan is covered by the pledged item, there is at least no direct risk of further debt, unlike installment loans or credit cards.

However, interest rates and fees for pawn loans can be very high compared to other forms of credit and further exacerbate the financial burden. The main problem: a pawn loan only solves short-term financial bottlenecks and does not resolve fundamental problems such as income gaps or over-indebtedness. You should be aware of these risks!