Original Article from patch.com
Pawn shops have surged in popularity in recent years, thanks to reality TV shows such as Pawn Stars and Hardcore Pawn, and the evolution of many pawn stores into “high-end collateral lenders.”
According to The National Pawnbrokers Association (NPA)’s 2015 Trend Survey, which assessed how changes in the U.S. economy have affected the pawn industry since the beginning of 2014, over 80 percent of pawnbrokers reported that collateral loans, also known as pawn loans, remain the most common transaction. Also, the national average pawn loan amount remains at $150.
The results reiterate that pawn shops are no longer the dingy, back alley establishments of past decades. High-end pawn shops, such as Boca Raton Pawn in Boca Raton, FL and Beverly Loan Co. in Beverly Hills, CA. are high-end collateral lenders catering to the tastes and needs of the cash-strapped rich — wealthy people with plenty of assets, but short on liquid cash. Higher-end shops do work similar to other pawn shops in how they loan money on collateral.
Many people from various walks of life take pawn loans, but their reasons are generally the same: They need money, but don’t want to permanently part with the item they are putting up as collateral for the loan due to sentimental value or other reason. Whatever the reason — and pawn shops usually don’t ask — pawn loans have become a mainstream way to get cash, without having to sell a valued item.
Here’s an overview of how a pawn loan works, and what to know before you agree to a pawn loan.
While pawn shops differ in estimate and loan prices, pawn loans generally work the same way between shops:
- A customer brings in something of value, from a laptop to a gold coin.
- The pawnbroker appraises it and gives the customer a fixed-term loan price for the item, plus interest, and a maturity date of the loan, usually 30 days. There is no credit check, as the loan is secured by the collateral.
- If the customer agrees to the loan price and conditions of the loan, he/she receives the agreed upon loan amount, and leaves the item with the pawnbroker as collateral to guarantee the loan.
- The pawnbroker will give the customer a pawn ticket with their name and address, a description of the pawned item, the loan amount and the maturity date. The local police will also get a copy of the receipt.
- When the loan is paid, including interest, the customer will receive the pawned item back. If a loan is not repaid, and no monthly interest payment is made, the pawnbroker will keep the item and cancel the debt.
- Some pawn shops will allow the customer to extend the loan indefinitely if they pay the interest on the loan.