How does a pawnshop work?
Pawnbrokers lend money on items of value ranging from gold and diamond jewelry to musical instruments, televisions, tools, household items, etc. These items maintain their value over a reasonable period of time and are easy to store, especially jewelry. All customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers.
Typically, loans are small averaging between $70 and $100, although they can be as small as $20 or as high as several thousand dollars depending on, the value of the collateral. Contracts vary from state to state, but the average loan period is 90 days. Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid.
Why would someone go to a pawnshop to get a loan?
Pawnshops offer the consumer a quick, convenient and confidential way to borrow money. A short-term cash need can be met with no credit check or legal consequences if the loan is not repaid. A customer receives a percentage of the value the broker believes the collateral would bring in a sale. Although the loan to collateral ratio varies over time and across pawnshops, a loan of about 50 percent of the resale value of the collateral is typical. In other words, pawnbrokers feel their loan is "paid in full'" at the time it is made.
When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The ticket states the customers name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and amount that must be paid to redeem the item. Most states regulate pawnshop interest rates and other charges, such as storage or insurance fees.
What is the foreclosure procedure?
If a customer defaults, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time, generally one to three months. Most states require the broker to notify by mail the owner of the pledge that he will loose the right to his property unless he redeems it within the stipulated grace period. In case of default, some states require the collateral be sold at public auction. Thirteen states and the District of Columbia require any surplus from the sale of the collateral over the amount Owed the pawnbroker, including accumulated interest and any costs related to the sale, to revert to the pawner.
Do most pawning customers lose their merchandise?
On average, 70 to 80 percent of all loans are repaid. Repeat customers make up most of our business, similar to any other lending or retail establishment, recourse loans, looking only to the item being pledged to recover their investment if the borrower chooses not to repay the loan. It is solely the choice of the customer whether he/she elects to repay the loan.
How can I be sure the merchandise I purchase at a pawnshop isn't stolen?
Less than one half of one percent of all loans are identified as stolen goods. Thieves and robbers are a pawnbroker's worst enemy. Pawnbrokers work closely with local law enforcement to catch and prosecute these perpetrators. A customer must provide positive identification to show evidence of the transaction. This information is then presented to the police department, therefore decreasing the likelihood that a thief would bring .stolen merchandise to a pawnshop. Pawnbrokers are trained to look for sighs of stolen property to avoid these costly mistakes.
What is the difference between buying at a pawnshop and buying at a retail store?
Mainly price. Pawnshops can offer you merchandise ranging from 1/3 or 1/5 off retail prices.
Why is the image of pawn broking changing since the 1930s?
Today's pawnbroker is upgrading everything from the interior and exterior of his or her shop location, employee presentation, customer service, signage, marketing and the merchandising approach. Pawnbrokers focus on providing exceptional customer service and are very active in the community, both politically, and in local charities. Pawnshops today range from a single or multi-store operation to publicly held company chains.
Do pawnshops attract indigents and derelicts?
Absolutely not. Indigents and derelicts have no assets to use as collateral. No one builds a business around these people. The typical pawnshop loan customer is employed, living within one mile of the store, is of either sex, and occasionally needs short term cash for an unusual bill such as a medical expense or car repairs. The typical retail customer is a bargain hunter; either by need or desire and comes from all walks of life. Most pawnshop customers are repeat customers.