Would you pawn your handbag? Recession-hit women are cashing in on their biggest fashion assets, but it can easily go horribly wrong...

Would you pawn your handbag? Recession-hit women are cashing in on their biggest fashion assets, but it can easily go horribly wrong...

By Sadie Nicholas

PUBLISHED: 17:48 EST, 13 May 2012 | UPDATED: 19:05 EST, 13 May 2012

When her husband, Jon gave Jessica Humphreys a £12,000 black Hermes tote two years ago, she thought she would never let it out of her sight.

‘It was a present for my birthday and I treasured it, keeping it in its luxurious soft dust bag and bringing it out on special occasions only,’ the interior designer recalls.

‘Then, last month, we were hit with a few big bills â€" £6,000 for our kids’ school fees and £1,500 for some emergency rewiring â€" which we couldn’t afford. That’s when I thought the unthinkable and sacrificed the Hermes.’

Their have been an increasing number of women raiding their wardrobes in a bid to raise cash as a result of the recession

Yet rather than sell the bag on eBay, which would have meant losing it forever, Jessica, 43, used it as collateral to get a loan. In short, she pawned it.  While traditional pawn shops are not somewhere you’d usually find middle-class women like Jessica, they’re emerging as their High Street lender of choice.

The National Pawnbrokers Association (NPA) reported 15 per cent growth in business last year, half of which they put down to the rise in individuals and small businesses using their services following the recession. The number of specialist web-based pawnbrokers and those accepting designer clothes and accessories has also grown, fuelling a rise in women raiding their wardrobes to raise cash.

‘I’d never considered pawning anything before,’ says Jessica, from Cobham, Surrey. ‘Then a friend told me she’d pawned her two beautiful Chanel handbags â€" one black, one ivory, that had cost around £1,000 each â€" plus a £3,000 Temperley evening dress, and been given £2,000 instantly. That’s when it dawned on me that our greatest assets, other than the house and cars, were in my wardrobe.’ 

Jessica Humphreys decided to pawn her £12,000 black Hermes tote after being hit with a few big bills

Within ten minutes of arriving at high-end pawnbroker Prestige Asset Finance in Weybridge, Jessica had signed the paperwork and left with £4,000 â€" and a huge sense of relief. She could now cover her bills, and was confident she would be able to repay her loan and reclaim her Hermes tote within the six-month term.

Ray Perry, CEO of the NPA, says: ‘Historically people pawned gold, but in theory you can pawn absolutely anything because what you’re doing is providing security against a loan â€" be it a car, jewellery or, as we’re now seeing, designer dresses, heels and handbags.

‘As long as the pawnbroker can source the expertise to assess an item to ensure it has a resale value â€" in the case of designer clothing, they’ll often turn to the original fashion house or a specialist auctioneer â€" then it’s perfectly viable.’

Such is the appeal of pawning for instant cash, the NPA now has 1,800 pawnbroker shops and online members in the UK â€" up from 530 in 2007. A pawnbroker typically lends up to 50 per cent of the value of an item for six months. The customer then repays the loan plus interest, which tends to be between two and seven per cent (compared with an average 19.5 per cent on a bank overdraft and 17.3 per cent on a credit card).

The bad news? If the customer is unable to repay within the time period, the pawnbroker takes possession of their items and sells them to recoup the value of the loan and interest. In 1971, fashion designer Diane von Furstenberg famously raised cash to launch her fledgling wrap-dress business by pawning her diamond ring. The dress became her signature and, today, her business is a multi-million-dollar corporation.

Fast-forward 40 years, and we find Sasha Cutts, 41, a private caterer, pawning her £1,000 DVF evening gown to keep her b usiness afloat. She also handed over two pairs of unworn Christian Louboutin heels worth a total of around £1,400, as well as a £10,000 Cartier watch and £5,000 Tiffany earrings â€" all of them gifts from her soon-to-be former husband.

‘Our bank accounts were frozen while we embarked on divorce proceedings and with my business to run and staff costs to cover, in November last year I found myself in need of £10,000 to see me through while I waited for clients to settle accounts,’ she explains. Sasha, who lives near Ascot, Berkshire, with her two-year-old son, says that although she likes to wear all of the pieces that she’s pawned, she no longer has an emotional attachment to them, mainly because they were gifts from her ex.

Inspiration: In 1971, Diane von Furstenberg raised cash to launch her fledgling wrap-dress business by pawning her diamond ring

‘If anything,’ she says, ‘I want to get rid of them. It certainly won’t hurt being parted from them for a few months. My priority is to keep my business running smoothly and the loan has enabled me to do that. I know that as soon as our divorce is settled, I’ll be able to repay my loan and reclaim my designer items.’

Ian Williams was the first online pawnbroker to offer loans against designer clothes and accessories (pawn brokeronline.co.uk). ‘Often women find that their wardrobes rival their jewellery boxes when it comes to their most valuable assets,’ he says. ‘One client needed urgent dental work so borrowed £1,500 against five pairs of Chanel shoes, all of them boxed with their original receipts and in pristine condition.

‘Another has pawned her Versace, Chanel and Louis Vuitton handbag collection to help with the cost of moving house. Many customers are struggling through redundancy â€" one lady has just borrowed £2,000 against a £5,000 leather Louis Vuitton case while she’s between jobs.’

Kate Hammond, 37, an HR manager, recently found herself in just that situation. After being made redundant in January she was worried about meeting her mortgage repayments and paying the monthly bills.

‘Like so many other couples our age, my husband and I had emptied our savings in order to raise the 25 per cent deposit we needed to buy our house three years ago,’ says Kate, who lives near Harrogate, North Yorkshire, with Chris, an IT manager. ‘So in March, I pawned my Mulberry Bayswater handbag that cost £800 and a Gucci bag made from python skin that cost £2,000. That gave us the £1,000 we needed to cover our winter utility bill.

‘The bags are both in immaculate condition. The Mulberry was a gift from Chris last year and the Gucci a treat to myself, ironically after getting my last job. The only other assets I have are my engagement ring and a diamond bracelet, but to pawn them would break my heart because of their sentimental value.’

Fortunately, Kate is about to start a new job so is looking forward to being able to repay the loan and get her bags back. The biggest risk with pawnbroking is not being able to pay the loan back and thereby losing your designer wardrobe.  James Constantinou, MD of Prestige Asset Finance where Jessica’s Hermes tote is in secure storage, says one woman recently pawned 16 immaculately kept handbags by Chanel, Mulberry and Louis Vuitton to raise £7,000 for her new business. She paid it back within three months because she was so desperate to be reunited with them.

Another lady took out a £4,000 loan against a 1969 Valentino glass-beaded cream lace gown. ‘It looked absolutely stunning as if it had never been worn,’ says James. ‘The lady was very nervous about parting with it, though, as it had belonged to her mother who had worn it the night she’d met her father. But she repaid the loan four weeks later and got it back.
‘We have had sad cases where a customer hasn’t been able to repay a loan, but then we always try our best to help them by extending the term.’

On average, 15 per cent of people fail to repay their loans, which is why financial expert Jasmine Birtles, of moneymagpie.com, urges caution.

‘On the whole pawnbroking is much better than some other forms of borrowing, like a payday loan,’ she says. ‘But people should always shop around, getting their item valued by several pawnbrokers and checking the interest rates and loan periods. If you’re attached to an item, think ca refully about pawning it and how certain you are you’ll be able to repay the loan in six months’ time.’

Even some pawnbrokers themselves are cautious about the new cash-from-fashion trend. Paul Aitken, of borro.com, says they won’t secure loans on high-end clothes and bags due to their risky saleability should a customer not be able to pay up. ‘All fashion items have a shelf life, even when they’re high-end,’ he explains. ‘A pawnbroker must be confident that if a loan isn’t repaid, he can then sell the item and recoup the money. I’d recommend women with these assets who need cash to just sell them.’

There’s also still a stigma attached to pawnbrokers, which is why Jessica hasn’t told her husband, and all the women in this feature wanted their names changed. ‘Jon bought me my Hermes bag so I think he might be hurt that I was willing to part with it,’ says Jessica. ‘Although I’m sure if I explained that it was being se curely stored and I have no intention of not reclaiming it, he would understand.’

For the time being, Jon thinks she borrowed the £4,000 from her parents, and the only person who knows about Jessica’s pawn habit is the friend who gave her the idea in the first place. Jessica is confident she’ll be able to pay off her loan in July, as by then the sale of a flat that she and Jon own will have gone through. ‘If more of my friends did it I guess I wouldn’t be so ashamed,’ she says. ‘We’ve got other bills to pay soon, so just in case our flat doesn’t sell, I’m having some of my vintage Sixties Biba and Ossie Clark dresses valued, too.

‘However, I’m also conscious about not using pawnbroking as a regular financial crutch. I wish, like thousands of other families, that during the good times Jon and I had saved more cash instead of spending it on things like my tote â€" even if it has ended up helping us out.’

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