In the past, there was a sharp division between people who did business with pawn shops and those who didn’t. If you asked the latter group “What is a pawn shop?” they would respond that it was a seedy place that dealt in stolen goods.
Of course, that wasn’t really true then and it is even further from the truth today. Pawn shops are ethical businesses that offer people a fast way to get money when they need it. They also make it more affordable for people to buy things they need or want at a lower price than retail.
Since the recession began in 2008, an increasing number of people are using pawn shops. Not only do they rely on them for fast cash for emergencies, but the number of non-emergency pawn sales and loans are also increasing. People are using the money more frequently for basic things like rent and food. The way that pawn shops do business often makes them a much better option for people in a variety of situations.
How Pawn Shops Work
The first thing you need to know about pawn shops is that they are businesses. They have to make money just like every other type of business does. That’s why they only buy or pawn items that appeal to the customers in their location. They want items of value but not if they aren’t likely to sell quickly to their customers.
The pawn shop works in two ways: they buy items outright or they provide loans using the item as collateral. If you want to sell an item, the pawn shop will look it over, determine the value, and make you an offer.
People who normally deal with pawn shops often negotiate the deals and haggle over the prices. It’s always worthwhile to try and get a little more for your item than they originally offer. The worst that can happen is that they will say no!
Once you agree on a price, you will probably have to fill out a paper and submit your identification. Most pawn shops are required by state law to keep records of who they purchase items from. Once the transaction is complete, you have the cash you needed and the pawn shop now owns your item.
If you want your item back, you may prefer to pawn it. This means that you give the item to the pawn shop to hold as collateral in return for money. You may get more or less money for pawning depending on the item and how confident the pawn shop is that you will pay your loan. Once you establish a relationship of trust between you, they may agree to give you more money on your items.
What Is a Pawn Shop Going to Do If I Don’t Pay Back the Loan?
You must pay the loan in addition to interest and fees by the date specified to get your item back. If you don’t extend your loan or pay it by that time, the pawn shop takes ownership of your item. You broke the agreement between you so the pawn shop will sell your item to recoup the money for your loan.
This is why the pawn shop is so particular about what they will and won’t accept for both pawning and buying. People repay about 80% of pawn loans, leaving the job of collecting on the additional 20% to the pawn shop. At the same time, you are within your rights to change your mind about paying back the loan. It doesn’t go against your credit rating and you don’t have to worry about harassing phone calls from collection agencies. The collateral takes care of everything for you.
Even if you plan to repay your loan and get your item back, sometimes things go wrong. You could lose your job or have some kind of medical emergency. Many people find it comforting to know that their pawn loan won’t turn into another problem that they have to deal with later on.
Pawn Shops vs Other Types of Loans
Payday Advance
One of the reasons that payday advance companies have gained in popularity is that they don’t require credit checks to give you a loan. All you need is an active bank account and proof of income. Although it’s fairly easy to get a payday loan, paying them back isn’t always so easy.
The fees for these loans are often between 300% and 400% or higher. They have limits on how much you can borrow based on your income and they must usually be paid back in a lump sum when you get your next payday. When you don’t show up with the payment, the company has your check and will deposit it into their bank account. If the money isn’t there, your financial problems can get a lot worse fast!
Title Loan
A title loan is a lot like a payday advance except that you use the title to your car as collateral to pay back the loan. Loans are only offered on cars of a certain value/age. You can get more money from a title loan than with a payday advance. The biggest disadvantage is that failing to pay back your loan results in the loss of ownership of your car.
Lending Institutions
If you’ve ever attempted to get a loan from a bank or other lending institution, you know that the process is anything but fast! These businesses are governed by a number of federal laws including the USA Patriot Act, Bank Secrecy Act, Truth-in-Lending Act, and others to protect you, the consumer. Of course, if you have a less-than-perfect credit score or don’t meet the financial guidelines of the institution, it could take several days and a stack of paperwork just to find out your application for a loan is denied.
Some types of loans with financial institutions also require collateral. The difference is that the items accepted are not worth a few hundred dollars like those used at a pawn shop. They are things like stocks and bonds, property, or other large-value items. You stand to lose a great deal more when you can’t pay back the loan.
Pawn shops are governed by all of these same laws without all the restrictions of traditional lending institutions. The only limiting factor is whether you have the items of value needed to get the amount of money you want.
Another benefit to getting a pawn loan is that it is much more private. You don’t have to provide references and let others know about your loan application. The most you have to do is show your ID as a matter of documentation.
What Is a Pawn Shop Going to Give Me for My Item?
There is no “standard price” that pawn shops give for any particular item. That includes the items they buy outright and loans. They begin by doing an appraisal to determine what the item is worth. Factors such as whether the item is in high demand and its condition also affect the price.
If you pawn something new and still in the box, don’t expect to get the same price that you paid in the store. For one thing, the retail cost reflects the cost of overhead. For another, the pawn shop must leave room to make a profit when they sell your item. They can’t give you $100 for an item that they expect to sell for $100 and break even. Whatever value they determine for your item, they will offer you a percentage.
Pawnbrokers often use the internet to research items and help determine their value. You can do the same thing before you ever take your items to the pawn store. Look on eBay for identical items in the same brand and condition. Use the prices of items that are already sold, not the asking price for those that haven’t. This gives you a good idea of what the shop can sell the item for. You can expect them to offer between 60% and 80% of that price.
Shopping at the Pawn Shop
If you still worry about buying stolen items at the pawn shop, put your mind at ease! There is almost no stolen merchandise sold in pawn shops. The requirement to provide identification and a complete description of the items they sell virtually eliminates this risk. This information is transmitted regularly to law enforcement and compared to any items reported as stolen. Knowing this prevents thieves from using modern pawn shops as a venue for selling stolen goods.
Since pawn shops only purchase top quality items that are in good condition, most items offer an exceptional value to the customer. The markup is much lower than on new items in retail stores. That means you can buy more for less.
Another reason that many people prefer to shop at pawn shops is the diversity of items offered. The items they sell aren’t boxes of the same style or the same brand. It is an eclectic selection of the best items of that kind.
How Much Do Pawn Shops Vary in Policies and Practices?
All pawn shops have some similarities such as offering a choice between purchasing and pawning the person’s items. Some items, like electronics, musical instruments, and jewelry are also common across the majority of pawn stores. Some specialize in one type of item. These stores are more likely to pay better prices if that happens to be the type of item you want to pawn or sell.
Loan terms and prices are some of the most important areas where different pawn businesses vary. Some offer extensions on loans so you don’t have to lose your item if you have problems meeting your payments. The more flexible they are, the easier it will be for you to pay back your loan and get your item.
When you sell or pawn an item, you want the pawn shop that offers the highest prices for their merchandise. When you’re shopping, you want one that keeps their selling prices low. The shop that keeps fees and interest payments within reason is capable of offering both.
Never choose a pawn shop based on location alone. Go online and do your research to find out their policies and practices. Learn what other customers have to say about them and whether they are just another business or a fixture in the community.
More people than ever are asking “What is a pawn shop and can it help me with my financial needs?” It’s impossible to give a single answer that is accurate for every pawn shop everywhere. A pawn shop is more than a business; it’s a service that benefits all kinds of people in the community.
Getting Past the Stigma
For some people, the stigma of pawn shops lives on. This is one of those areas where you will find the reality is much different from the rumors. If you’ve heard stories about pawn shops selling stolen goods or giving people almost nothing for their valuables, now you know the truth about the process.
The bottom line for many people is that they just don’t have the credit rating or the extra income they need to get a traditional loan and repay it. The reasons for some of these loans are too important to ignore. Medical or dental treatments, repairs to a work vehicle, or essential tools for school or work are just a few of the reasons that more people are finding out what a pawn shop is.
If you need fast money and you need to know if you have an item of value, contact Monte de Piedad. We have thirteen stores in San Diego that offer flexible pawn loan rates, highest buying rates, and reasonable selling rates! We have been rated the Best Pawn Shop in San Diego for two consecutive years. Our customers and our community mean everything to us. Buying and selling at a pawn shop are a lot easier than you think!