Okay, so in today’s question we have a very fundamental inquiry about pawn shops in general.
The question is, how do loans at pawn shops work?
This is actually very easy to understand, and doesn’t involve much at all.
Let me break down the process for you very simply.
You’re going to take something of value that a pawn shop accepts, such as gold jewelry, consumer electronics, power tools, or musical instruments and go down to your local pawn shop.
The pawn shop will look at the item, possibly look it up on a site like eBay or Amazon, and make you an offer on the item based on the value that they are able to give.
This value won’t be whatever you paid for the item when it was brand-new. What they are looking for is the current used value for the item.
That’s why they consult sites like eBay and Amazon. These sites act as used merchandise marketplaces where people are currently selling the exact same item you have at a competitive price.
Whatever these asking prices are, pawn shops know that there is a good chance that they will be able to ask a similar price.
The pawn shop will typically offer you between 40% and 60% of whatever value they find.
If you agree to their offer, then they will give you cash on the spot for the loan. You will leave the item there until you are ready to pick it up.
When you’re ready to pick up your item, you come back with the cash for the loan plus any interest that may have accrued on the loan while you had it in the pawn shop.
When you pay back the loan, the pawn shop will give you back whatever items you pawned in the exact same condition in which you left them there.
Should you need to make a loan in the future, you are absolutely able to do so at the same pawn shop. It’s not as if you can only make one loan against an item.
Is There Anything Else You Need To Know About Pawn Loans
Well, that’s actually a very good question. There are some other things that you need to know about making loans at pawn shops.
For instance, if you leave an item at a pawn shop too long and don’t pay on it at all, then the pawn shop may have to forfeit the loan.
That’s where the pawn shop then keeps whatever item you loaned, but not because they are the enemy, just because you didn’t pay on it in time.
The pawn shop will then turn around and resell your item to recoup whatever investment they have made into the loan.
I have to tell you, in the pawn shops that I’ve worked with, this doesn’t happen all that often.
Typically speaking, more than 80% of people come back for the loans that they make on items and are able to get their items back.
Of course, everyone hates losing their items, but it does happen from time to time.
How Long Do Pawn Shops Give You To Come Back And Get Your Loan
Well, that’s a question that’s going to depend on your state and local laws.
The rules governing how long a pawn shop has to hold an item before they forfeit it are determined on the state level, and regulated by state officials.
It’s not as if the pawn shop can just make up a certain amount of time that they feel comfortable holding collateral for. They have to follow their state laws regarding such issues.
The length of time is going to vary from state to state. However, it is common for most states to allow between two and six months before a pawn shop can forfeit a loan.
It should give you plenty of time to repay the loan when you are able to.
Is There A Limit To How Much You Can Borrow At A Pawn Shop
Not really, although it will greatly depend on what you bring into the pawn shop to begin with.
Some pawn shops are able to do loans in excess of $10,000 without a problem.
That having been said, you have to have the collateral to back up that loan. That means that you’re going to need either one item or several items of really significant value that the pawn shop will be interested in making a loan against for that dollar amount.
In some cases, a pawn shop just may not be able to loan you enough money based on the items that you have. In these situations, you may have to look into other forms of financing to take care of the issue.
Are Pawn Loans Safe
Perfectly safe. As long as you are coming to make your payments when you’re supposed to, or get your items out in a timely fashion, there’s actually nothing to worry about. Pawn loans are often known as non-recourse loans. What that means is, that if you can’t repay the loan, or have to default on the loan for whatever reason, the pawn shop can not turn around and sue you or go after your credit report for any reason.
They are secured loans. What that means is, that since you are leaving collateral there for the pawn shop to keep, they are able to sell that item should they have to recoup whatever investment in the loan they have. There is no legal risk to you, no credit risk to you, and definitely nothing that you really have to worry about.
This is what makes pawn loans one of the best forms of short-term financing available to most consumers.