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How Pawnshops Work: A Basic Guide for Pawnbroking in the Philippines

Hands holding gold necklace over jewelry shop display


Have you ever wondered why there are more pawnshops than banks in the Philippines?

This is attributable to the reality where pawnshops provide a wide range of financial services in places where banks are scarce. In fact, these outlets can become crowded and have long queues even in the provinces and especially in outlying areas.

Aside from the borrower incurring nominal transaction costs, the loans are simple to secure especially because it functions where in an item of worth that can be used as collateral is given in exchange of the loan.

Pawnshops, in contrast to their negative image in other countries, are favorably viewed by many Filipinos due to their critical position in fulfilling their short-term financial needs.

What is a Pawnshop?

A pawnshop is a store or form of business that lends money to consumers who carry valuable items to be pawned. These valuables are referred to as “collateral.” The precious asset will only be returned from the pawnbroker after the loaned money and interest have been repaid.

If the borrower fails to repay the pawnbroker’s loan and interest within the agreed-upon time frame, the pawnbroker can now sell the valued object to another buyer to recoup the money they loaned.

Pawnshops also provide micro-lending facilities, which are a critical source of credit in many developed countries, especially here in Asia. They further fill the void created by financial systems by offering loans to low-income families and minimum wage earners that might not have been available otherwise. They can also boost credit market competition by offering an alternate source of credit to those who have been denied bank loans.

Over time, pawnshops have developed into multi-purpose stores that offer a wide range of goods and services. They have also expanded into unrelated market practices such as money remittance, money changing, bill payment for collection services, e-load, and delivering facilities for the selling of microinsurance goods to households.

How Do Pawnshops Work?

People go to pawnshops for three reasons. First, they need cash in order to secure a swift loan. Second, they must pawn personal possessions such as jewelry, electronics, and other precious objects. Finally, they try to purchase unredeemed objects that are up for sale.

If you’ve never been to a pawnshop, don’t be intimidated because they have fantastic bargains. They’re similar to a garage sale and a flea market wrapped into one.

There are also three types of people who usually transact at pawnshops, including the following:

  1. People who need quick cash and are willing to pawn their precious item as collateral
  2. People who are trading their used items
  3. People who buy new or used merchandise

So, what’s the big thing with pawnshops? The fundamental concept of a pawnshop is to lend money to customers. The procedure is as follows:

  1. The act of pawning starts when you bring something you own and give it to the pawnbroker as a collateral for your loan.
  2. The pawnbroker lends you money in exchange for the collateral.
  3. You get your equity after you have repaid your loan and interest.
  4. If you fail to repay the loan, the pawnbroker will hold the collateral.

Suppose you’re pawning your recently purchased wedding ring, which the pawnbroker values at P2,000. You will get P2,000 and a pawn ticket in exchange for pawning your wedding ring. The following will be written on the ticket:

  1. You pawned something.
  2. The amount of money borrowed for the object
  3. The sum of money due in 30 days to reclaim the item

Your ticket will indicate that you got P2,000 for your wedding ring and that you would pay P2,200. This amount already includes the additional 10% interest on the loaned money. You will then have 30 days to get your ring back. During those 30 days, you can do any of the following:

  1. Return to the pawnshop and pay the full price to get your wedding ring back.
  2. Pay the recurring fee at the pawnshop to stretch your loan for another 30 days.
  3. Do nothing and let the pawnshop keep and sell your ring.

That is the fundamental pawnshop transaction. A traditional item pawned at a pawnshop has a high chance of being reclaimed by the individual who pawned it. If it is not reclaimed, the pawnbroker would have to sell the item to recover the loan. In this case, the object must be in good working condition in order to be resold.

When compared to a yard sale or a flea market booth, a pawnbroker cannot sell junk. This is done to maintain the pawnshop’s reputable name and company in the community.

What are the Commonly Pawned Items at a Pawnshop?

Many people have depended on pawnshops for quick cash. However, have you ever considered what goods you could pawn? Here are some of the items that are most commonly pawned to obtain much-needed cash.

  • Jewelry

When most people hear the word “pawnshop,” the first thing that comes to mind is jewelry. After all, it has long been used as a symbol of power, prosperity, and beauty throughout society and history. Jewelry is an excellent investment piece in addition to being a representation of a person’s status.

Rings, earrings, necklaces, or anything that can be weighted and appraised—whether gold, silver, or diamonds—are great examples of often pawned jewelry. If you intend to pawn your valuable jewelry, especially ancestral pieces, make sure that it is thoroughly maintained so that it retains its pristine quality.

  • Designer Bags

While many individuals cannot afford designer bags, there are those who collect them. This is because the value of these bags increases over time, and when pawned, the cash collected may exceed the five-digit figure. Keeping this in mind, if you own a designer bag that is unused, you might want to consider pawning it. Aside from decluttering your home, you’ll be able to make some additional cash.

  • Watches

Luxury watches are another common item pawned at a pawnshop. Precious metals or jewels are used in creating them, and most of these timepieces are uncommon and expensive. Due to their unrivaled craftsmanship, durability, and aesthetic appeal, luxury watches are easily utilized as collateral.

  • Electronics and Gadgets

Televisions, cellphones, computers, cameras, tablets, and gaming consoles—name any gadget or piece of electronics and there’s a high chance that they can be pawned. Of course, the amount you receive will be determined by the current value of your belongings, so make sure they are all in outstanding condition to receive the maximum value. You may also charge them before taking them to the pawnshop so they may be checked and priced appropriately. Keep in mind that while retro versions of these devices may be priced higher, more recent models that are out of date may not fare as well during appraisal.

  • Musical Instruments

Electric guitars and drum sets are excellent examples of musical instruments that may be used as collateral. However, you must make sure that they are in “playable” condition. The value of the objects will be reduced if they have scratches or evidence of wear and tear. To increase the value of the products, you could include extra strings for the guitar and even drumsticks for the drum set. Take note that rare and more premium brands would have a higher appraisal price than their more common counterparts.

What You Need to Know in Buying Jewelry from a Pawnshop

Aside from depositing valuable items as collateral for quick cash, you may buy jewelry from pawnshops. This is because some people are unable to pay back the money they borrowed, effectively transferring the ownership of their valuable items to the pawnshop. These are eventually sold to customers looking to purchase fine jewelry at a lower cost.

When you visit a pawnshop, you’ll see a section where they exhibit the pieces of jewelry for sale, such as vintage or hard-to-find items. The majority of them are made of gold, although some are made of silver, platinum, and other precious metals.

However, how can you ensure that you obtain the best possible price for the jewelry you’ve chosen? Here are some tips to keep in mind before buying jewelry from a pawnshop:

  • Shop Around and Negotiate

Feel free to visit many pawnshops to check how much you can obtain for your chosen jewelry, as the value of specific items varies from one pawnshop to another. You can also seek advice from friends or acquaintances who have purchased jewelry from a pawnshop. Take note of both the positive and negative reviews so that you can receive the assistance you require and avoid receiving a less-than-favorable bargain.

  • Test the Jewelry

If you’ve already found the jewelry you want, you may have the pawnbroker test it with a solution to see if it contains impurities or not. Be wary of stainless steel being marketed as white gold in some circumstances.

You can also determine if the precious stone on the jewelry is genuine or a synthetic counterfeit. Scratching it with your fingernail or a coin is an excellent way to determine its genuineness. If you scratch it and it leaves a mark, the item is most likely fake.

  • Check the Price

Once you’ve determined that the jewelry is genuine, look into its price. Usually, jewelry has a price tag attached to it. If there aren’t any, be wary since they may raise the price, especially if you tell them your budget.

  • Read the Policy

Some pawnshops will ask you to sign a legal document stating that you purchased authentic jewelry from them and that there is no return or refund policy. Before you make a commitment and spend your money, carefully read the policies since this agreement is intended to safeguard both you and the pawnshop from any unforeseen incident or unwarranted claims.

Brief History about Pawnshops

Pawnbroking has a long history among the financial systems of humankind. It dates back at least 3,000 years to ancient China and may also be found in the earliest historical records of the Greeks and Romans.

In 1462, the Franciscans established the montes pietatis. This provided low-income people with interest-free loans. Later, in order to avoid early depletion of their money, they were compelled to charge interest. Public pawnshops had a brief rise in the Middle Ages before being re-established in the 18th century to relieve borrowers of the excessive interest rates charged by private pawnshops.

Pawnbrokers made loans only on the inherent worth of the collateral back then, and pawning has since become a source of financing for those in need. This system also became a reliable funding method for commercial initiatives. Currently, statutory restrictions of banking and finance are based on the legal foundation developed executives who had extensive backgrounds in pawnbroking.

Arrival of Pawnshops to the Philippines

Pawnshops have been popular in the Philippines due to their micro-lending services. This is essential in augmenting the financial capabilities of various individuals and families in need of quick cash. Under Presidential Decree 114 and Central Bank Circular No. 374, the Bangko Sentral ng Pilipinas (BSP) was granted the authority and obligation to supervise pawnshops in 1972.

Benefits and Risks of Pawnshops in the Philippines

Do you intend to borrow money via pawning? Before you go to a pawnshop, consider the following benefits and drawbacks:

  • Instant Access to Cash

Pawnshops provide instant access to money, which is very useful when you need it. This is why Filipinos incur pawn loans for a variety of purposes, most notably to cushion the financial blow in case of an emergency or to supplement capital for a small business.

In fact, the Bangko Sentral ng Pilipinas (BSP) stated in its 2017 financial inclusion survey report that pawnshops are one of the most well-known and accessible places where consumers may receive loans.

  • Easy and Fast Process

In pawnshops, the process is as simple as submitting a collateral for evaluation to the pawnbroker, filling out a form, signing a pawn ticket, and collecting a copy of the pawn ticket along with the cash. In only a few minutes, you are on your way home with the money you borrowed.

  • No Credit Checks

When borrowing money from pawnshops, there are no credit and background checks. Instead, both parties will agree on the collateral’s price and redemption date. If the collateral is not redeemed by the deadline, the pawnshop will simply sell it.

  • No Effect on Credit History

It will not harm your credit history or credit score if you fail to repay what you owe. The only repercussion is that the pawnshop gets to retain your pawned property. Furthermore, they are not obligated to submit credit information about their consumers to credit bureaus.

On the other hand, bear in mind the following risks you may encounter, especially when making your first pawnshop transaction. These include:

  • high loan interest rates
  • low appraisal
  • short loan terms
  • the risk of losing your pawned item

Do take note that these risks are affected by various factors, but it is mainly up to the specific pawnshop you choose. That is why you should only transact with highly reputable pawnshops so you can get the best value for your items.

Qualities of a Trusted Pawnshop

How do you know if you can place your trust in a pawnshop? Here’s how:

First, their company must be officially registered. In the Philippines, business permits and certifications must be displayed for the safety of clients. Aside from that, you could look for news stories on them online. Learn what their consumers have to say about them and their services. This way, you’ll be able to see if the pawnshops genuinely keep your stuff safe and secure.

In addition, look into the pawnshop’s ties and organizational initiatives. Choose one that has a track record of successful transactions and collaborations with other firms. Lastly, find a pawnshop that has been acknowledged or honored for their services so you can rest certain that you’re in good hands.

Fortunately, you can trust that Cebuana Lhuillier complies with all these standards. With our great reputation, you can rest easy knowing that you are transacting with industry experts.

With our pawning service, you will never be short of funds because we take a wide range of collaterals, including jewelry, electronics, luxury bags, music instruments, and watches.

We are also one of the leading pawnshops in the country, providing a 30% appraisal rate in about 2,500 outlets nationwide.

Cebuana Express (Upcoming Application)

To help you stay safe during the pandemic, we have expanded our Cebuana-from-Home online platform to include pawning services. This way, our customers may now pawn valuables without having to risk going to the nearest branch in their area.

To apply, you must fill out the application form on the website. Once completed, the application will be processed by a member of Cebuana Lhuillier’s TeleSales team, who will allocate it to the nearest rider for transaction completion.


Pawning is a valuable service for Filipinos, especially to those who need quick cash. However, finding a trustworthy pawnshop is critical so you could make the most out of your belongings. Cebuana Lhuillier is your partner for hassle-free and reliable transactions. Visit to the nearest branch in your area or connect with us through the Cebuana CARES system.