How Do Pawn Shops Work, Pawn Shop Loan Interest Rates & Loan Alternatives In Singapore

Lifestyle, Finance,

Pawnshops are reliable and legal alternatives to loans when you need money quickly. If you have a poor credit score or you want to avoid the paperwork involved with personal loans, you can consider pawning one of your assets.

But did you know that pawnshops are good for investment opportunities, such as purchasing gold and silver? We’ll tell you all about pawn shops, their interest rates, and how to avoid losing money. Read on!


How Pawn Shops Work In Singapore

In Singapore as in other countries, you’ll give a pawnbroker a valuable asset in return for a cash loan. The contract you sign requires you to pay back the loan and the set interest rate within six months. When you’ve repaid your loan, you can get your pledge back. If you can’t make the repayments, the pawnbroker has the right to resell your items. Your items can be a gold necklace or a silver bracelet, as long as it is valuable.

The six months deadline extends with each instalment you pay. However, the interest rate grows accordingly so that repaying your loan becomes very costly once you go over the initial six months period. As such, many people prefer surrendering their pledges if they can’t pay on time.

Remember that the pawnshop loan represents 60-80% of the value of your pledge. If you need more money, pawning your assets will not be sufficient. Besides, the increasing rate raises the value of the loan to up to 300% by the end of 24 months. That’s why you should consider carefully what you’re pawning and if you can make timely repayments.


Pawn Shops In The Past Vs. Pawn Shops Now


Pawnshops date back to three millennia, having been recorder in all major ancient empires. In the old days, pawnshops were mostly used by poor peasants, which is why they were dubbed the “poor man’s bankers”. Singaporean pawnshops emerged five years after the country’s foundation in 1819. Singapore took great care to regulate these institutions to protect its poor.

Pawnshops faced some hardships caused by the 1929 Great Depression and the World Wars, but they became lucrative again once peace was established. Nowadays, Singapore has about 280 registered pawnshops.

These pawn shops are now free from the “poor man’s banker” stereotype thanks to popular shows like Pawn Stars and Hardcore Pawn. Now, pawnshops have a good reputation thanks to their investment opportunities so that they have many white-collar clients.

That’s why today’s pawnshops display jewellery, gold, and branded products in ample rooms for everyone to see. In the old days, pawnshops looked more like fortresses with metal bars that separated the staff from the customers, who were not to be trusted. You would have likely seen popular pawnshops such as Maxi-Cash along MRT stations or in shopping malls. They are flashy and often have promotional events, distributing flyers and balloons to passers-by.

So, if you want to look at some good investment opportunities, check out a pawn shop now. Before you do that, though, let’s see what you can pledge.


What Can You Pawn? What Do Pawnshops Accept As Collateral? 


Pawnshops accept valuable items as collaterals. The word “valuable” doesn’t necessarily mean “expensive.” Sure, you can get a lot of money if you pledge a gold bracelet, but you can also get a reliable sum if you’re pledging power tools or a useful electronic device.

Remember that the pawnbrokers are more likely to accept pledges with a high potential of being resold. That’s why you can pawn expensive jewellery, branded items like Prada bags, luxury timepieces, or collectables. You can also pledge laptops, phones, or tables, sports equipment or power tools. It is all about the resale value.


What Interest Rates Do Pawn Shops Have?

We already warned you that pawnshop rates aren’t the most convenient if you can’t repay your loan quickly. From that point of view personal loans at banks or licensed moneylenders are more advantageous.

Pawnshops in Singapore have a 1% interest rate during the first month. The rate increases subsequently by multiplying the number of months that have passed with 1.5%.

As such, your interest is 1.5% in the second month, 3% in the third month, and 4.5% in the fourth month. After 12 months, your interest rate is 18% of the remaining loan amount.

So, if you compare pawnshops to other institutions remember that:

  • Banks have a 1% monthly interest rate.
  • Credit cards have 2%-3% monthly interest.
  • Moneylenders have 1%-4% monthly interest rate for unsecured loans.

All these rates remain steady, plus you can borrow bigger sums.

If you do not have valuable items or branded goods for pawn shops but need money urgently, you can consider getting a quick loan from licensed moneylenders in Singapore or apply for a loan from banks. While banks may have lower interest rates, it is harder to get their loan approval and there’s a lot of paperwork and waiting time. Licensed moneylenders such as BST Credit will be able to approve and give you the money within an hour (should all documents be received), perfect for urgent needs.


Pawnshops In Singapore Pros & Cons


If you’ve yet to make a decision, let’s analyze the pros and cons of pawnshops in Singapore:


  • You don’t have to deal with paperwork.
  • You won’t damage your credit score if you can’t make the repayments.
  • Pawning doesn’t get recorded into your credit history.
  • You’ll get fast cash on the spot, whereas banks can have you wait for a few days. Even the quickest moneylenders in Singapore still require a few hours to approve the loan and make the money transfer.
  • The interest rate is affordable for the first few months if you compare it to other financial institutions.
  • If you can’t repay your assets and the pawnbroker sells them for a bigger price, you get the money difference.


  • Your interest rates skyrocket starting with the fourth month so that it becomes increasingly difficult to redeem your pledge. If you need money quickly and have a poor credit score, it’s best to contact a licensed moneylender that’s expert in creating flexible loans. The interest rate will remain comfortably at 4% even with 24-month loans, whereas your interest becomes 36% at a pawnshop.
  • You can’t get your pledge back without making the necessary repayments. Other collateral-based loans have the same disadvantage, but their steady interest rates allow you to pay your instalments easily.
  • You can opt for a more convenient personal loan without having to entrust one of your valuable items to a pawnbroker. Most licensed moneylenders in Singapore can offer you large five-figure sums without any collateral.
  • You only get 60-80% of the value of your collateral with a pawnshop. If you know you can’t redeem your pledge quickly, it’s best to sell your asset from the get-go so that you can at least get more money for it.


Pawnshops vs. Personal Loans From Licensed Moneylenders 

As you can see, pawnshops and moneylenders have different pros and cons. Now, let’s take a practical example and see how a personal loan works at pawnshops vs. licensed moneylenders.

For instance, you may need $10,000 to cover your medical expenses. Most Singaporeans don’t have that much saved up and, if you have a poor credit history, you can be tempted to go to a pawnshop. If you have a couple of gold heirlooms in your family, you can pledge these to get your money back.

If you can repay your loan during the first month, your interest is $100 so that your total loan gets to $10,100. But that’s unrealistic unless you get two extra jobs.

The more realistic case is that you have a $6,000 salary and that you restrict your monthly expenses to $2,000. That way, you can pay $4,000 in monthly instalments to your pawnbroker:

  • Repaying $4,000 during the first month covers the $100 interest rate and $3,900 principal loan. You’re left with a $6,100 loan.
  • Repaying another $4,000 during the second month covers the $91.5 interest rate and $3,908.5 principal loan. You’re left with a $2,191.5 loan.
  • $2,257.24 during the third month covers the 3% interest rate and the $2,191.5 principal loan.

As such, you can still get away pretty easily with about $10,260. The problem, in this case, is that you have to lead a very strict lifestyle for three months, covering just your basic needs until you can repay your loan and redeem your family heirlooms.

But, what if you can only afford $1,000 per month? Or even less?


Getting A Fast Cash Loan From A Licensed Moneylender As An Alternative


If you run out of time to get a loan from a bank, do not have anything to pledge with a pawn shop or, is unable to redeem your pledge within the stipulated time, you can consider getting a fast cash loan.

Fast cash loans from licensed moneylenders in Singapore are well-known alternatives to getting money quickly. They charge reasonable interest rates so that you can make comfortable repayments without living on a thrifty lifestyle.

For example, getting a $10,000 personal loan with a licensed moneylender can be repaid comfortably within 6 to 12 months, depending on your loan contract. This makes the monthly installments a lot more manageable. You also reduce the risk of paying extra interest.

Regardless if you pledge an item at pawnshops or get a loan, you have to make sure that you have the repayment ability. Here are some suggestions to generate extra income:

  • Get a side job
  • Asking your friends and family
  • Selling your assets
  • Invest in stocks and bonds
  • Passive income such as blogging, stock photos, or renting your old wedding gown
  • Cash-out refinancing loan
  • Teach tuition
  • Rent out a room in your house
  • Affiliate marketing

Make sure to calculate your monthly spending before getting a loan. This prevents late repayments which will incur extra charges, regardless if money is borrowed from pawn shops or from licensed moneylenders. If you need help in calculating your financial portfolios, you can make a free appointment with our loan officers.

To find out more about BST Credit, you can read our story here or our customer reviews here.



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