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 $10 or as high as several thousand dollars depending on the value of the collateral. 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 ON 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.

 

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 to 1/2 off retail prices

 

DO MOST PAWNING CUSTOMERS LOSE THEIR MERCHANDISE?

On average, 80 percent of all loans are repaid. Repeat customers make up the majority of our business, similar to any other lending or retail establishment. Pawnbrokers know the vast majority of their customers because they often borrow against the same items over and over again. Pawnbrokers offer non-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 fifth of one percent of all collateral is even suspect as having been misappropriated in any manner. Thieves and robbers are a pawnbrokers 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 signs of stolen property to avoid these costly mistakes. It is not in the interests of the pawnbroker to accept potentially stolen merchandise because the police can seize the merchandise and the pawnshop owner loses the collateral and the loaned money.

 

FUN PAWNBROKER FACTS:

As mankind's oldest financial institution, pawnbroking carries on a tradition with a rich history. Pawnbroking can be traced back at least 3,000 years to ancient China, and has been found in the earliest written histories of Greek and Roman civilizations.

 

During the Middle Ages, certain usury laws imposed by the Church prohibited the charging of interest on loans, thus limiting pawnbroking to people who had religious beliefs outside of the Church. Out of economic necessity, and because of problems in the banking system, pawnshops made a resurgence in later years.

 

The most famous pawnbrokers in history were The House of The Lombards who operated pawnshops throughout Europe during the 14th century. They even counted royalty, such as King Edward III of England, among their clientele.

 

The symbol of the Lombards' operations were the three gold balls that still remain the trademark of pawnshops.

 

The Nursery Rhyme "Pop Goes The Weasel " refers to pawning. A weasel is a shoemaker's tool and to "pop" is to pawn. "That's the way the money goes... Pop goes the weasel."

 

Queen Isabella of Spain pawned the crown jewels to finance Columbus' voyage to America.

 

The word pawn originates from the Latin word "patinum" which means cloth or clothing. The French word "pan" refers to a skirt or blouse. In the early centuries, the principle assets people had were their clothes and borrowed money by pawning their clothing.

 

The symbol of a pawn shop in Hong Kong is a bat (the animal) holding a coin. The bat signifies fortune and the coin signifies benefits.