Online Pawnbroking vs Traditional Pawnbroking
The concept of lending funds against assets has been recorded as early as the 5th century in China where pawnshops often formed partnerships with monasteries as they were exempt of paying tax. Then in medieval Italy, in the region of Lombardy, bankers or ‘Lombards’ as they were called operated pawnshops. They eventually spread across Europe and also settled in the UK. As loans were unregulated, Lombards often took advantage of borrowers and charged them high interest rates, resulting in the first pawnbroking loans act in 1785. The act required pawnbrokers to have a licence to be able to issue pawnbrokers loans, costing £10 for those operating in London, and £5 for anyone operating outside the city. Interest rates were set at 0.5% per month and lenders faced a fine if they did not return the pledged asset once the loan was redeemed. This act was later improved and renewed in 1872 allowing lenders to increase interest to 1.5% per month. If pawnbrokers were found to be accepting stolen goods, they could not only be fined but also lose their licence – the secured asset also had to be returned to the rightful owner. Many of the policies introduced in 1872 are still in place today.
Originating from the word ‘Lombard’ many European cities have a Lombard street, referring to where the first Lombards or pawnbrokers settled. They were identified with a sign outside their shop designed with three golden balls suspended from a bar. According to the legend, the three balls symbolised the three girls that St Nicholas lent gold to so they could get married.
A borrower who wishes to pledge an item, have to leave their goods with the pawnbroker. The broker will pay out funds which are secured against the value of the pledged item. Once the loan plus interest is repaid, the asset will be returned to the borrower.
Unbolted is located just a stone’s throw away from Lombard street in the City of London. Although Unbolted still follow the general rules of pawnbroking, we have modernised the concept and created an online pawn shop. We operate a peer2peer lending platform with private investors, whose funds are managed by Unbolted and paid out to borrowers. All our loans are secured against assets.
Applications are submitted and vetted online, and our website is quick and easy to navigate. Funds are paid by bank transfer, usually the same day as receiving an asset. Contract are also managed and signed online. Unbolted have successfully adopted traditional pawnbroking to make it more suitable to our modern online society.