Pawn shops thrive, even in Gangnam
Through this hole, Jeon, the 54-year-old owner of this rundown pawn shop located in Apgujeong-dong, southern Seoul, communicates with his customers. He takes collateral, mostly watches and jewelry, and gives loans.
Jeon is the local pawn broker.
This confined and dingy store couldn’t be more out of place in the middle of Gangnam, the poshest area of Seoul.
Of many notices, one reads: “Operating at the same venue for 26 years with the lowest interest rates.”
Under current law, pawn shops are able to charge up to 3.25 percent interest rates monthly. When a 1 million won ($961) loan is given to a customer for a month, the pawn shop takes 32,500 won in interest.
Other notices read, “Will report to the police if you show up with stolen goods” and “No counterfeit watches.”
Jeon’s is one of 23 pawn shops that were operating in Gangnam District as of last month.
According to the Korea Consumer Loan Finance Association, which is a national association of nonbanking lenders, the number of people who opened pawn shops jumped to 806 last year compared to the previous year’s 562, a 43.4 percent increase.
Under the law, one has to complete a mandatory course to open a shop or renew a license.
Out of 240 registered pawn shops in Seoul last month, 54 were newly opened ones, meaning that one in four pawn shops in Korea’s capital opened in the last year.
“Since some don’t use the word ‘pawn shop’ on their signboards, we assume that the number is actually more than 240,” said Lee Jae-seon, secretary general of the loan finance association.
With the advent of Japanese nonbanking private lenders in the early 2000s, which charged lower interest rates than private moneylenders, people could get money fast without leaving valuables such as wedding rings or electronic goods to pawn shops.
Adding to the numerous nonbanking private lenders, eased rules on credit card issuance in the late 1990s was a huge blow to pawn shops. People could pay for things on credit instead.
It seemed like pawn shops were shrinking into nothing more than exotic locations for period films.
Analysts say the 2008 global financial crisis played a crucial role in bringing pawn shops back.
Regardless of one’s credit worthiness, anyone with valuables can get a loan. When you borrow money from a pawn broker, you don’t need to worry about a slip in your credit rating or history.
Another reason for the rise in pawn shops is that it’s a business that’s hard to lose money in.
“I thought it would be safe because I get collateral from customers,” said a pawn broker who opened a shop a year and a half ago. He wanted to remain anonymous. Most of the pawn shop owners mentioned in this story didn’t want their names to be published.
There was even a company that started franchising pawn shops last year, saying anyone with between 30 million won and 50 million won could open a pawn shop.
The recent resurgence poses one unique question: Why does Gangnam, the most affluent area in Seoul, have the largest number of pawn shops? Of the 240 pawn shops in Seoul, 23 are located in Gangnam District.
Pawn shop owners say Gangnam has the most varied customer base.
“I see people who just borrow 100,000 won, but I see others who borrow 10 million won after leaving a big diamond ring,” said another pawn shop owner.
They say Gangnam has a lot more people who own pricey stuff than in other areas in Seoul because it is a place with many luxurious boutiques. These fancy shops and department stores keep attracting people with an insatiable appetite for luxury foreign brands like Hermes and Chanel. The more they shop, the likelier they are to get into a financial pinch. And then they have the pricey goods to pawn.
One proof is the many secondhand luxury goods stores in Apgujeong-dong and Cheongdam-dong. They sell secondhand branded bags, shoes and clothes, but they also run a secured loan business by taking luxury goods as collateral.
The secondhand luxury goods stores target women in their 20s, 30s and 40s.
“Since the interior of our store is quite similar to any other retail store, customers feel more comfortable,” said Kim, a 46-year-old who runs a secondhand luxury goods shop in Apguejong-dong. “They come here to take out a loan, but they also purchase some second-hand goods on their way out.”
In the 1970s, ’80s and ’90s, pawn brokers didn’t take handbags as collateral. But things have changed.
“My customers used to bring TVs, VCRs and record players in the late 1980s,” said Jeon.
“This pawn shop is located on the third floor, and they had to carry the heavy electronic goods from the first floor. They groaned a lot.”
Japanese electronics goods were considered the best back so people could get more money when they showed up with Sony products.
But no one leaves electronic goods these days. Instead, luxury brand bags and watches fill the void of Sony TVs and record players, and gold and diamonds are preferred by many pawn brokers.
In order to keep pace with the times, some pawn shops specialize in IT gadgets. Han Sang-jun, 40, who runs a pawn shop called Hongdae IT Pawn Shop near Hongik University, western Seoul, said, “Laptops are the most frequent items I get.”
If a certain brand of laptop is traded at 600,000 won on secondhand websites, one can get up to 70 percent of the second-hand laptop price, which is 420,000 won.
“I see more customers on every 5th, 15th and 25th day because people usually pay their credit card bills on those days,” added Han.
As pawn shops see younger customers, some of them change the decor of their shops by setting up comfortable couches and tables.
A pawn shop located in Donggyo-dong, Mapo District, which is close to a number of colleges in Sinchon, looks like a typical cafe.
Kim Young-wan, 31, the owner of the pawn shop, which is the Hongik University branch of The Good Pawn Shop, said, “My main customers are freelancers who work in the arts.”
“But I see this as a sign that times are getting tougher because these people have nowhere to borrow money other than pawn shops,” added Kim.
BY CHO HAN-DAE [firstname.lastname@example.org]