Loan amount
The pawnshop appraises the jewellery and the two sides agree on the loan. By law the loan may not be less than 30% of the appraised value, unless the pawner asks in writing for a smaller amount (PD 114, section 9). The appraised value is the pawnshop's own figure and can differ from the world value of the gold shown here.
Interest and charges
Each pawnshop sets its own interest rate. The regulations set no ceiling, but a rate may not be unconscionable, following the Supreme Court decision in Medel v. Court of Appeals. Where no rate is agreed, 12% a year applies. Besides interest, a pawnshop may charge a service charge of at most ₱5, and never more than 1% of the loan (PD 114, section 10). The pawn ticket itself is free (section 12).
The pawn ticket
The pawn ticket is the contract. It records the item, the loan amount, the date, the interest rate and the maturity date, and it is signed by the pawnshop (sections 11 and 12). Pawnshops must also disclose the effective interest rate, which includes all charges.
Redemption and auction
After the maturity date the pawner has 90 more days to redeem the item by paying the loan and interest (section 13). If it is not redeemed, the pawnshop may sell it at a public auction run by a licensed auctioneer. The pawner must be told the date, hour and place of the sale before the 90 days end, and the auction must be announced in two daily newspapers in the week before (sections 14 and 15).
Before pawning
Ask for the offer per gram for the karat of the item, the monthly interest rate and the maturity date, and compare the offer with the gold value above. Keep the pawn ticket safe: it is needed to redeem the item.