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March 13, 2022

Where the rich pawn their luxury goods

Everyone weeps for the rich these days, what with their riddled stock portfolios and vacant summer homes.

Yet though they’ve had Ferraris repossessed and kids pulled from private schools, one everyday cash-raising scheme you’d think the wealthy would never partake in is hitting up the local pawn shop.

That’s just what CNN reports is happening across the U.S., however.

According to the news agency’s Money channel, the rich, short on free cash, are now visiting pawn shops with all the trappings of long-ago cash: Rolexes, diamond necklaces and vintage coin collections.

Indeed, though the recession is technically over, liquidity hasn’t returned for many of the affluent, and certainly getting a loan isn’t quite as easy as it once was.

*Bing: How do pawn shops work?

So that’s why, instead of borrowing from a bank when the risk of defaulting means your credit rating will plummet, plenty have resorted to taking out cash using their luxury goods as collateral.

“A lot of people like to call them the one per cent, but we call them our client base,” one pawn broker-to-the-rich told CNN Money. “These are people who are well-off, who have extraordinary toys, but unfortunately are not liquid enough to keep them.”

This accompanying video tells the story of the wealthy pawning off $90,000 Rolexes and $54,000 diamond necklaces, but the real tale here is the risk the rich are willing to take to secure cash today.

A bank loan can be slapped with any number of interest rates, but in exchange for the relatively anonymity and isolated hazard of borrowing from a pawn shop, those hawking their luxury goods are facing massive, bloated interest rates.

CNN reports that many pawn shops are charging as much as four per cent interest per month – a staggering 48 per cent APR – and some in other parts of the U.S. can charge more than six times that amount, 25 per cent every 30 days.

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...