Pawn shops as an alternative to Quick loans
The pawn shop business has almost been nonexistent in many years. The past couple of years however, there has been increased demand for access to fast financing. This can for example be seen by the growth of online quick loans and payday loans, which give people easy and fast access to money. This industry was very small just 5-6 years ago, compared to now where it is a market with more than 1 billion kroner in loaned out money.
Online quick loans and payday loans are appealing because they give fast access to money. Often, all you have to do, is fill out a form online, and shortly thereafter the money is on your account. It is however extremely expensive. As an example, the largest player in Denmark of quick loans has an APR (Annual Percentage Rate) of 820% (as of January 2019). The extremely high interest rates mean, that people often end up with more debt than their personal income can handle, and it is very difficult for them to pay the loan back.
With a pawn shop, you give them an item of value as security for your loan. That means, that in the unlucky situation where you cannot pay back the loan, the pawn shop can sell your item. Through the sale, they get their money back, and you don’t owe them any money. It is of course unlucky that you lost an item, but positively you never create a situation where the debt gets out of hand – there is no debt creation by using a pawn shop.