The road to quick money ends in a dreary side street in downtown Stuttgart. In the shop windows of the municipal pawn shop there are pieces of jewelry that were once used as collateral for a loan.
A Rolex Air-King for 13,939 euros, a Patek Philippe for 11,000 euros or a Maurice Lacroix for 1999 euros. The range is wide: in addition to bicycles, Meissen porcelain and handbags from Louis Vuitton, there are also watches, necklaces and bracelets for 19 euros.
In times of high inflation and rising energy costs, the pawn shop can quickly provide the necessary small change. Business has picked up in the last few weeks, said the managing director of the Central Association of the German Pawn Loan Industry (ZDP), Wolfgang Schedl, of the German Press Agency in Stuttgart. Everything is getting more expensive, reported customers of the local member companies, said Schedl. He didn’t have any concrete figures. In view of the current situation, however, he could imagine “that people’s need for credit will increase significantly in the coming months”.
The business of pawnbrokers is easy to explain: if you need money quickly, you can get a loan against a bargaining chip. Interest and fees are due for this. If the customer pays everything back in time, he can take the loaned item back with him. If not, it will be auctioned.
In the municipal pawn shop in Stuttgart, one morning at the beginning of August, there was still no major rush and no major need. At the end of the long corridor, a young man is standing at one of the five counters. Gold Rolex on left arm, another Rolex on counter. He doesn’t want his name published, just this much: He’s in his mid-20s, is self-employed and deals in luxury cars. As a self-employed person, he sometimes needs money quickly, he wants to pick up the watch again in a month at the most. He later received a loan of 19,000 euros for this.
The man in the traditional Stuttgart company, whose history goes back to 1872, is well above average. A loan averages more than 500 euros, said managing director Jürgen Barth. Loans in the tens of millions are granted each year. According to Barth, more than 95 percent of the items would be picked up again. The deal is worth it. According to Barth, the annual surplus at the subsidiary of Landesbank Baden-Württemberg was around EUR 287,000 last year. Although it is a real rarity, because the vast majority of the companies are in private hands.
Jewelry is the most commonly traded
Barth explained that jewelry was brought in most frequently. Followed by high-quality watches and various assets such as musical instruments, bicycles, e-bikes or luxury handbags. But there are also unusual items, for example a high-quality microscope worth 6,000 euros.
Union official Schedl has noticed in recent years that more and more people are coming from the middle class, he says. Pawnshops are often referred to as “poor man’s bank”. And in Stuttgart, too, they are registering a change. “We’re finding that young adults value luxury more,” Barth said. The young man with the Rolex is a good example of this. “When it comes to average customers, we’re not just talking about the financially vulnerable.” But: His house also has a social mission and sometimes grants a loan of 20 euros. “Of course we serve people from all walks of life.”
Mortgage loans are more expensive than bank loans
Anyone who gets rejected by the banks is in dire need and the pawn loan is a kind of last resort, said Niels Nauhauser, a financial expert at the consumer advice center in Baden-Württemberg. According to the consumer advocate, the pawnbrokers are more likely to appeal to people with money worries. Especially with smaller sums, the loans are much more expensive than usual loans because of the fees, says Nauhauser. An example: For a loan of 51 to 100 euros, a monthly interest rate of one percent and a monthly fee of 2.50 euros are due at the municipal pawn shop in Stuttgart.
Barth argued that he had to bear a higher risk than a bank. The deposit is the only security. If he accepts a pledge, he doesn’t know what it will bring in in the future or whether it is still for sale. There are also costs for insuring the items.
Barth is currently observing the trend that people are consuming more after the restrictions imposed by Corona. There are many who are now on vacation. But Barth’s gaze is also directed towards the future. “I expect an increased need for credit at the end of the year or early next year, for example when bills for energy costs come or the advance payments to the landlord are increased.”
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