Korean pawn shops dealing in smartphones and other IT products are enjoying a boom on growing demand from tech-savvy but cash-strapped young clients in need of short-term loans.

2013-06-16 14:43

IT pawn shops mushrooming

By Nam Hyun-woo
Pawn shops dealing in smartphones and other IT products are enjoying a boom on growing demand from tech-savvy but cash-strapped young clients in need of short-term loans.
For years, people have been pawning items for short-term loans because they could not get loans from mainstream banks or were worried that borrowing money would lower their credit rating.
While traditional pawn shops deal in literally “anything worth money,” such as watches or expensive clothing, IT pawn shops specialize in tech gadgets which have emerged as valuable assets.
On May 22, a new IT pawn shop opened near Kyung Hee University in north eastern Seoul. The store is registered with the Financial Supervisory Service as a legitimate lender. With a neat interior, Website and young staff the shop is bourgeoning across the nation, with 21 branches in Seoul and other metropolitan cities.
Young customers drop off their IT products for quick loans. Collegians are the shops main customer base.
With a simple ID check, customers can leave the shop with money within 10 minutes, a staffer at the shop said.
Because borrowing money can sometimes be seen as degrading, some customers hesitate to walk into the pawn shops themselves. The shop has put in place alternative arrangements to serve such customers. This is how it works. A person interested in borrowing can text their product’s details such as model name, the date of purchase and whether it is a full package or not. Then a staffer calls the customer and negotiates the loan amount.
If the customer is satisfied with the offer, they then have to send the product through a parcel or bike delivery services, for the item to be evaluated before the contract is entered by telephone.
“An ID check is essential since some products may be counterfeit or stolen items,” the staffer at the shop said.
Smartphones such as the iPhone series and Galaxy series are the most commonly deposited items followed by tablet PCs, DSLR cameras and laptops.
Some expensive headphones and speakers are also in demand. The shop receives about 6 to 10 customers daily.
The staffer stated that the biggest reason for the success of the business is that one can borrow a small amount of money quickly with low interest rate, regardless of one’s credit rating.
IT pawn shops lend around 50-70 percent of a device’s market value at a monthly interest rate of 3 percent.
For instance, to receive a loan of 300,000 or 350,000 ($260 to $300) won a customer can hand in a Galaxy S3 smartphone, one of the trendiest smartphones in town.
At the 3 percent monthly interest rate, the customer pays some 300 won per day.
Most of the loans range between 200,000 won and 1,000,000 won, with high-end laptops usually fetching the highest amount.
According to the staffer, surnamed Kim, most visitors look for short-term loans, which do not exceed one month.
If a customer wants to extend the loan period, contracts are usually renewed reflecting the new value of the item which usually fluctuates.
IT pawn shop owners say they have trouble keeping digital products with short life cycles. With manufacturers rushing to launch new products, even the latest model rapidly becomes outdated. Thus IT pawn shops sell products immediately a customer fails to repay, according to the shop.
“People have more IT products and almost everyone has smartphones these days. Also, general consumers’ accessibility to high-end pricy devices, which had been considered as gadgets only for experts or professionals, is rising. Therefore, more people will likely visit pawn shops with tech gadgets,” said the staffer.
In 2012, Korea’s penetration rate of smartphones surpassed 60 percent for the first time, more than double the previous year, according to data by the Korea Information Society.