In the wake of America’s big economic wake-up call back in 2008, dollar stores and thrift stores saw, and continue to see, a big resurgence. And now another kind of retail quasi-lender is commanding all kinds of attention from sellers and buyers, too—pawn shops.
I admit to having grown up with a weird bias against pawn shops. To me, pawn shops were just one level above Vinny the Loan Shark operating illegally in some dark alley in the bad part of town just waiting to break some knees.
Where did that come from? I have no idea really, but let me quickly follow by saying it is a most faulty stereotype.
Pawn shops are respectable businesses that offer a viable service in many communities. And these days, thanks in part to Rick Harrison, whose family owns the Gold and Silver Pawnshop in Las Vegas and stars in the History Channel’s Pawn Stars—one of my personal favorites— business is booming.
What it is?
A pawn shop, owned and operated by a licensed pawnbroker, makes secured loans on personal property left in the broker’s possession to be held as collateral. The property can be redeemed by the customer when the loan plus a finance charge (think: interest plus per-month service charge) is repaid.
What are the costs?
Total fees charged by pawnshops, which in nearly all states are regulated by state and local laws, can range from 5 to 25 percent, per month. That’s high, I know. But remember we’re talking very short-term loans.
And we’re talking about merchandise that is often used and in some cases suspect because it’s impossible for the broker to predict the collateral’s true value, should he have to sell that item to recoup the money lent.
What to pawn?
Pawnbrokers accept a variety of personal property as collateral—jewelry, clocks, computers, firearms, art, electronics, and collectibles.
What are the terms?
When a pledged item is not redeemed according to the agreed-upon terms, pawnbrokers are required to notify the customer that the loan period has expired giving him or her a final opportunity to redeem the property.
Once expired, the broker has the right to sell the time. In some states, the pawnbroker gets to keep the entire proceeds from the sale. In others, once the loan (plus interest and fees) is recovered, the balance of the sale price, or some portion thereof, is paid to the “pawner.”
What if it’s stolen?
In many states pawnbrokers are required by law to file daily a list of items that have been pledged, giving serial numbers and other identifying information. This gives police the opportunity to recover stolen items.
What’s best to pawn?
A pawn shop may not be the best place to liquidate items that you wish to sell outright like furniture, clothing and similar household items. Sites like eBay and Craigslist or the local classifieds would likely fetch a higher price.
But for the person who needs some quick cash, and is willing to put up something of value to secure that loan—a pawnshop could help meet an urgent need.
Popular items in a pawnshop are jewelry and coins. Other good choices are firearms, high-quality tools, historical artifacts, and musical instruments.
After watching only a few episodes of Pawn Stars, you’ll get the feel for what types of merchandise make a pawn shop tick.
Why look in a pawn shop?
And now, let me point out the upside of the pawn shop. Bargains. Go to a pawn shop if you’ve never been in one, just to look around. It’s quite amazing and really fun!
Expect to find a large variety of jewelry, power tools, electronics, cameras, computer games, and computers.
You do need to know your stuff. Don’t expect pawnbrokers to be experts in all of the items they offer. Even my favorite hosts on Pawn Stars often plead ignorance and need to bring in an expert for a consultation.
One last thing
Need some quick cash and have something of value to put up as collateral? Head for a pawn shop. And never forget that a pawnbroker is in business to turn a profit—nothing is set in stone. Whether you’re a pawner or a buyer, everything is negotiable.
YESTERDAY: How to Save Yourself From a Foolish Purchase