October 13, 2015 08:21
Young Koreans are hocking their IT products in order to make ends meet, but instead of heading to traditional pawnshops they go to businesses that specialize in smartphones, laptops and digital cameras.
These pawnshops rarely check the credit history of loan seekers and take no time to verify the authenticity of products, so they have become very popular among people in their 20s and 30s who are in need of some quick cash.
One recent afternoon from 2 to 4 p.m., five men in their 20s and 30s visited an IT pawnshop in Gangnam. One university student who got W400,000 for his digital camera, said, "I need to pay for my English lessons and my parents can't afford to pay for them (US$1=W1,144)."
Another man who hocked his tablet PC for W350,000, said, "I felt uncomfortable borrowing money from my friends, and my parents aren't in a position to help me out."
Pawnshops in Gangnam, Jongno and Gwangjin districts give out cash equivalent to 50 to 60 percent of the value of electronics products, so pawning a brand-new W1 million smartphone can raise around W600,000 in cash. The whole process takes just around 10 minutes and involves a simple identity check and assessment of the quality of the product.
They charge around three percent interest. Loan periods are usually three months, considering the short life cycles of IT products. If customers fail to return the borrowed money within three months, the pawn shop gains the right to sell the item.
Park Sung-yong (32), who works in a pawn shop in Gangnam, said, "We get a lot of customers toward the end of the month who pawn their IT products to pay off their credit card bills. Ten to 20 percent of them fail to repay their debts on time and we end up having to sell their products on the secondhand market."
Pawnshops thrive in tough economic times. According to the Consumer Loan Finance Association, there are 1,087 pawn shops in Korea. Last year alone, 498 new ones opened and this year another 187. That means 60 percent of all pawn shops opened last year. "The number of pawnshops had been dropping sharply until 2010, but started rising again since 2013," a spokesman for the association said.
Pawnshop owners said customers have been getting younger over the past five years, while the goods they hock have also changed. During the 1997 Asian financial crisis, people traded cash for expensive mink coats, luxury watches and jewelry and got between W1 million to W5 million in cash.
But these days, university students or young jobseekers pawn IT products that cost around W1 million and get between W300,000 and W500,000 in cash. At work behind the trend is a tough job market and a growing sense of financial independence among young Koreans.
Lim Young-jin, a professor at Daegu University, said, "Young people prefer to give up belongings like IT gadgets rather than ask friends or relatives for money."
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