Formal pawnshops have been a feature of Thai society for nearly a century, serving as a safety net whenever families run out of cash. Yet many borrowers have a limited understanding of these transactions, often misjudging the true cost of short-term credit.
Recent wild fluctuations in the gold price – which has swung as high as 81,950 baht and as low as 62,500 baht per baht-weight (about 15 grams) – have sparked intense debate on social media.
Many borrowers who pawned their gold at peak prices are now seeking to default on their loans, realising that the cash amount they borrowed is now far higher than their collateral’s market value.
“When I pawned three baht-weight of gold a while ago, I received 72,000 baht per unit. But now that the market price has dropped significantly, I don’t want to redeem it,” one social media user posted. “However, someone told me the lender [gold shop] could sue me for the difference. What should I do?”
Legal experts say the answer depends on where the gold was pawned. If the transaction took place at a licensed pawnshop, borrowers can simply walk away. However, those who used gold as collateral in a private loan contract face stricter obligations if the gold price falls.
What the law says
Under the Civil and Commercial Code, borrowers who use collateral to obtain private loans must repay their debt within the contract’s deadline.
If the borrower fails to do so, the lender has the right to sell the collateral at a public auction whose date, time and venue must be announced in advance.
If the net proceeds from the auction exceed the outstanding debt, the surplus must be returned to the borrower. But if the sale fails to cover the outstanding debt, then the borrower is legally liable to pay the remaining balance to the lender.
Different rules for licensed pawnshops
The loan conditions are very different at state-regulated pawnshops. According to the Pawnshop Act, if a borrower fails to repay the outstanding amount or extend the contract within the deadline, ownership of the collateral passes to the pawnshop.
However, the borrower cannot be held legally responsible for any loss if the market value of the collateral drops below the original loan amount.
“The worst-case scenario for someone pawning their valuables at an official pawnshop is that they may end up losing them,” an employee at a state-run pawnshop told Thai PBS World.
And if the price of gold surges, borrowers can return to the pawnshop to renegotiate an increased loan against the same item.
“If the price of gold soars, the value of the collateral rises alongside it,” the employee explained.
However, despite the legal protection offered by licensed pawnshops, financial experts say customers may still lose out by abandoning pawned gold during price dips. Borrowers risk incurring hidden fees, such as non-refundable craftsmanship charges originally paid when purchasing jewellery.
“Also, you may be losing items of irreplaceable sentimental value,” one expert said.
The pawnshop boom
The pawnshop debate comes amid an unprecedented surge in the number of people pawning their valuables across the country – a sign that households are suffering amid the economic downturn.
According to the Office of Government Pawnshops, 1.41 million people pawned their valuables during the 2024-2025 fiscal year, marking an 8.8% year-on-year increase. The total value of pawned items jumped by 20.02%, reaching 29.35 billion baht.
Data from the SCB Economic Intelligence Centre underscores this trend, reporting that total pawnshop loans rose by 18.3% in the first quarter of this year compared to the same period last year.
