For consumers seeking safety net loans from a trusted, licensed pawnbroker, here are answers to the following common questions about pawn stores:
A pawn store’s core business is making collateral loans. Pawn shops offer loans, secured by something of value. The pawn shop may have other business elements such as retail sales of jewelry, watches, guns, electronics and other items. However, pawnbrokers focus on lending money based on valuables.
Customers bring in an item of value, and the pawnbroker offers a loan based on a percentage of the item’s estimated value. The pawnbroker then keeps the item until the customer repays the loan with interest and usually a pawn ticket fee ($5 in most states). Pawn stores are regulated on a federal, state and local level.
On average, customers receive only a portion of the item’s resale value. Remember, the pawnbroker is loaning money on the item, not buying it. The pawnbroker must consider the cost of storage, security and future demand for the item, along with the resale value if the loan is not repaid. The average loan amount nationally is $150. However, loans can be made for any amount, depending on the value of the pawned item.
Interest rates vary from state to state and usually amount to less than bank overdraft fees, utility reconnect fees, or credit card late fees. As an example, an $100 pawn loan at 13% would cost about $13 in interest each month. Many Pawn shops offer a 90 day loan, but you can redeem your item at any time. The minimum interest charges would be for one month. Compare that to an overdraft fee or a credit card late fee that may negatively affect your credit. Be sure to shop around for the best rate and loan amount, especially if you will need the loan for more than just one month. John’s Loan and Jewelry in Las Vegas for instance offers the lowest pawn loan rate in their area, 8% a month for a four month term as opposed to other shops that charge 13% per month for a three month loan.
In order to secure a pawn loan, you simply need an item of value and proper identification. Pawn loans do not require a credit check, bank account or co-signer. Call the pawn shop you plan on visiting to see if they accept the item of value that you have. Some pawn shops only accept certain types of items like gold jewelry or brand name watches.
Defaulting on a pawn loan can never affect consumers’ credit scores. Because the loan is based on collateral—that is, an actual piece of property—the loan is considered paid in full when the item is handed over to the pawnbroker.
Pawn stores have been providing a safety net to families that encounter sudden financial emergencies with simple collateral loans. These vital, small-dollar loans can be made in a few minutes and are simply not offered by banks and other traditional lending institutions.