How loan rates can top 85%

PAWNBROKERS might charge interest of about 6 per cent a month for loans of less than £1,000. Loans are usually for six months, and the rate once fees are included works out at the equivalent of 85 per cent a year – which is expensive.

Pawnbrokers must send out a letter 14 days before the maximum agreement period is up informing a customer they must pay back what is owed – otherwise the item may have to be sold with the proceeds pocketed by the broker.

If a sale does better than expected, the customer shares in the proceeds. Typically, at least 90 per cent of valuables are recouped.

However, some people shop at pawnbrokers – luxury ones in particular – to snap up exclusive items they might struggle to find elsewhere.