Pawn Shops – Do You Use Them?

by Emily on December 2, 2011

When most people think of pawn shops, they associate them with places that are seedy and that sells merchandise that has possibly been stolen. Pawn Stars has become a popular reality TV show on the History Channel. The show is about a family owned and operated pawn shop in Las Vegas, Nevada and depicts the daily activities at the store.  With the downturn of the economy and the popularity of this show, people have started to wonder- should I pawn items, should I buy goods from pawn shops and what exactly is the function of a pawn shop?

Essentially what a pawn shop does is offers you a short term loan for your jewelry, electronics, valuables and the like. Pawn shops do not always just buy the items that customers bring in, they typically issue a loan to the customer against those items. Some customers prefer to borrow money from the pawn shop over selling their item because it gives them cash and allows them to purchase back their item later, at a cost. Some of the interest rates on money borrowed at pawn shops can be as high as 20% a month. Pawn shops do not require a credit check in order to loan you cash for your items, and the transaction does not effect your credit score.

The employees at the pawn shop will make an estimate of how much they are willing to loan you for your item. If you as the customer repay the loan within 30 days you can reclaim the item you left with the pawn shop to secure the loan. You can also extend the time of repayment for the loan and keep borrowing against the same item. If you fail to repay your loan, the pawn shop will put your item up for sale.

A new site launched this summer called, which allows customers to complete an online application describing the items they would like to pawn. As a customer you can include pictures of the item. The site evaluates the customer application and if the item is acceptable you print a shipping label and overnight the items to the company free of charge. Once the company receives the item, the loan amount is deposited into your bank account. The interest rates on these loans are between 3% to 6% per month and the loan payments typically come in monthly installments.

Pawn shops interest rates are different in every state and storage fees may apply for larger items. The cost of credit from pawn shops is high, but there is no financial damage to your credit score. If you do not repay the loan, you surrender the item, there are no collection agencies hounding you for money. Pawn shops may also just flat out purchase your item and use it as inventory for sale in their store. You will get cash for the items you sell and you should try to negotiate the best price possible when selling or buying an item from a pawn shop. Pawn shops do extensive checking on items sold and also work with the police in order to determine if an item is stolen, so you will not have to worry that the item you are purchasing will be reclaimed by the police for evidence in an investigation.

Pawn shops may be a quick and easy way to get cash for your valuables, but it does come at a price. If you are selling an item, you will only get a certain percentage value of the item. If you are taking a loan out and using product as collateral, you may not be able to repay the loan and you will forfeit your valuables. Pawn shops could be useful to shop for discounts on electronics and merchandise. Whatever you do, make sure you think carefully before stepping into the pawn shop and if you do choose to sell or buy items there, be prepared to negotiate.

Have you ever used a pawn shop? Tell us about your experiences in the comment section.

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  • Yes, I hv used a pawn shop – Brothers Collateral in Hollywood, CA, which is a fair & friendly business – catering to a lot of musicians among other things. Through the years I hv pawned some of the instruments I had which weren’t in use, for emergency funds. And I always redeemed them! I have always felt a little more secure knowing that I had assets that I could pawn for cash if necessary! This is especially true in the day when small bank loans are unavailable, and credit cards are scarce….

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