I’ve been in the pawn industry for over 40 years, all of them with the Provident Loan Society, the only not-for-profit pawnshop in New York State (and probably the country).
Pawning is a great way to get quick, short-term cash loans by using a personal item of value as collateral to ensure that the loan gets paid back according to schedule. At Provident, we accept gold, jewelry, precious gems, fine watches, silverware, and the occasional collectible item as collateral. But I can remember when we also accepted radios, cameras, musical instruments, and furs.
The problem with radios and cameras is that, with all the rapid changes in technology, they became obsolete so quickly and hence reduced their perceived value. So now, we no longer accept these as loan collateral.
In the 1970s, our Times Square office had a few women customers who used their furs coats as loan collateral. Or did they? Each April, they’d bring in their furs, which we stored in our refrigerated vaults on premises. Come November, the ladies would return, pay back their loans, and retrieve their furs.
Basically, they used us for fur storage, as it was cheaper than going to the local dry cleaners. Eventually, we did away with the refrigerated vaults as this service got to be too expensive—and we never saw those ladies again.
In Hong Kong, where fashion is king, the pawnshop Yes Lady Finance will accept designer handbags from the likes of Gucci, Chanel, Hermes and Louis Vuitton as loan collateral. If the customer fails to pay back the loan, the handbag is sold at one of the company’s second-hand designer stores. Handbag loans start at about $200 but can go much higher. One client recently secured a loan for HK $250,000 ($32,200 USD) for a crocodile-skin purse.
For What It’s Worth – Assessing an Item’s Value
The amount that a pawnshop will lend depends on the total assessed value of the items used as collateral. Appraising an item’s value is a complex process, and there can be quite a difference between the guesstimate of the item’s owner and an expert appraisal by an experienced pawnbroker.
In addition, the perceived value of an item varies by those who perceive it. For example, an auction bidder might value an item higher than the owner, the jeweler who sells the piece, or the distributor who is merely the middle man.
For example, one client brought in a Vacheron Constantin platinum “repeater” wristwatch as collateral for a $1,500 loan that the owner eventually defaulted on. Repeaters, which audibly chime at preset intervals, are more common for pocket watches than wristwatches. So when we priced the defaulted item for auction, we put its initial asking price at $3,000.
When the bidding began, and the price kept increasing to $10,000, then $30,000, then $50,000, we began to think that maybe we underestimated the watch’s value. The piece finally sold for $290,000—the highest auction price paid for a watch at the time.
Similarly, we gave a $7,000 loan to a client who put up a set of Harry Winston earrings and a Tiffany bracelet as collateral. The client defaulted, and the jewelry also fetched $290,000 at auction.
Unusual Collateral Loan Items
One of the more uncommon collateral loan items I’ve seen is the 1969 Kentucky Derby Winners Trophy. It had been used several times by the owner for collateral loans, but eventually the owner defaulted and we had to put the item up for auction. We listed its value at $15,000 – $20,000, based solely on its 14k gold content, but were curious what its perceived value might be for a perspective bidder.
I went to the Kentucky Derby website, which listed the trophy’s estimated value at $70,000, but I wanted to be sure. So I called the Kentucky Derby Museum to confirm its value and was promptly told that the original trophy was in the museum and that we had a fake. After our conversation, my museum contact decided to do a bit more investigating. Turns out that the horse’s breeder had commissioned a local artist to make a duplicate Kentucky Derby Winner Trophy and that’s what was in the museum.
The trophy was bought at auction for $60,000 by Louisville-based Secretariat.com, operated in conjunction with Mrs. Penny Chenery who owned the legendary 1973 Kentucky Derby winner Secretariat. The under-bidder turned out to be the Kentucky Derby Museum, although the new owner has agreed to loan the original trophy to the museum. This marked the first public transfer of ownership of a Derby winner’s trophy since 1937. Ironically, just before the trophy went to auction, its value was removed from the Kentucky Derby website.
London-based pawnbroker Borro, who deals exclusively with luxury items, will make collateral loans up to $2 million—far more than the $150 national average. .And they’ve loaned large sums for rather unusual collateral items including £81,000 ($126,000) for a rare stamp collection, £41,000 ($64,000) for a train set, £32,500 ($51,000) for Beatles memorabilia, and £23,000 ($36,000) for a Fender classic guitar collection.
Speaking of guitars, our Bronx office once held a Gibson acoustic guitar as collateral for a $15 loan. This was a real beauty and stayed with us for years. The loan was being defaulted and I fantasized about buying it for myself at auction. Then the owner returned out of nowhere, paid back his loan, and got his guitar back.
I still think about it.