When people ask me “What does a pawn shop do,” they always seem a little confused when I tell them, “Well, we help people.”
Have you ever needed a little extra money, but didn’t have the best credit?
Maybe you’ve needed some extra cash, but so much money to really qualify for a loan from a normal financial institution?
Solving those needs are effectively what a pawn shop does for people, to put it in the fewest words possible.
When people need to come up with some money in a hurry to cover an emergency expense, avoid a utility disconnection, get their car fixed, etc. there’s not many options for getting the cash together.
Sure, a lot of people will ask their friends or family for a few bucks here and there, but what do you do when they don’t have the money either?
Others don’t really want their friends and family knowing that they are in a tight cash pinch and would rather get the money elsewhere privately – like a pawn shop.
These are the scenarios that I find people normally come into our store looking for help with.
The difference between a pawn shop and other lenders is how we operate, and the variety of other services that a pawn shop will typically offer.
Pawn Shops Make Pawn Loans
When we talking about lending people money at a pawn shop, that is typically done through a pawn loan.
In What Does It Mean To Pawn Something you learned that a pawn loan is a short term loan against collateral that you take into a pawn shop.
This collateral can be many things depending on the pawn shop you are working with. (Not all pawn shops accept the same types of items.)
In many cases, this will mean gold or silver jewelry, newer consumer electronics, professional brand name power tools, musical instruments, etc.
Basically, just about anything of value most pawn shops will consider looking at to make you the loan you need.
When you are ready, you come back in and pay off your loan. You will then be given back whatever it was that your “Pawned” to get the loan to begin with.
Pawn Shops Also Buy Things
In Do Pawn Shops Give You More Money If You Sell, you learned that not only do pawn shops also buy things, but they will typically pay more for those items if you do sell them versus just making a pawn loan against them.
Buying things can be a big part of the pawn business and it can really be of use to you if you need more than a pawn shop is willing to loan you on an item and you don’t need or use whatever it is that you brought into the pawn shop to begin with.
Pawn Shops Also Sell Things
Keeping in mind that pawn shops make loans on items, sometimes those loans default.
What that means is that whomever made the loan never came back to repay it. In order for the pawn shop to get back the money that they had loaned the person, they keep the item and resell it to a customer.
In addition, pawn shops have to do something with the items that they are buying from customers as well.
If you ever find yourself looking for things like a TV, video game system, jewelry, musical instruments, etc. – looking into a pawn shop first can save you a ton of money!
Other Services That Pawn Shops May Offer
Loaning, buying, and selling are the three big things that most pawn shops do regularly.
That having been said, many pawn shops will offer additional services to their customers. Some of these may include:
Check Cashing– If you are unfamiliar with check cashing, it is a service provided where the pawn shop will take a check that has been written to you and turn it into cash for a small fee. Depending on the state where you live, that fee can be from around .5% up to 5% in some cases.
This is a great service for pawn shop customers in most cases since many of them do not have bank accounts to begin with. This allows them to not just handle getting loans in one place when they need them, but also taking care of these other financial related services when they need to.
Money Orders– Just like check cashing, pawn shops will sometimes provide money orders to their customers for free or for a very low fee.
In the scenario where a pawn shop customer doesn’t have a checking account, paying certain bills by mail with money orders is the next best option.
Bill Payment– Speaking of paying bills, some pawn shops will also have services in place that allow their customers to pay their utility bills right at the pawn shop as well.
These bills can be things like water and sewer, electric bills, gas bills, cable and more. They typically charge a very small fee for processing these transactions.
Prepaid Cell Phones– Another service that pawn shops will offer is pre-paid phone activations and on-going monthly service charges.
Prepaid cell phones have become very popular in recent years and a lot of pawn shop customers tend to use them as they don’t involve credit checks and can be paid on the customer’s time table – not the cell phone companies.
Contract Cell Phones – Even though prepaid cell phones have grown in popularity, contract oriented cell phone services are still widely used.
In some pawn shops, you can get new lines of service or pay your exist cell phone bills in their stores. This is really handy when you need to pay a bill, but don’t have the cash on hand because you can pawn something and pay the bill all in the same place.
Consumer Loans– Some pawn shops also offer consumer loans to their customers.
A consumer loan is technically different, but very similar to payday loans. Essentially, if you have a checking account, they will loan you money against your next paycheck. You will write the a post-dated check for the day you get paid int he amount of the loan+any fees for the loan, which they will then cash on your payday.
It’s basically like borrowing money against your next paycheck, which is really handy for those that having checking accounts. Be careful however not to get too many of these stacked up as they can be hard to manage.
Jewelry Repair– Some pawn shops will also offer jewelry repair services.
This makes sense for them as they will often make loans against, or buy, broken jewelry. In addition, since they sell jewelry, it’s a nice service to be able to offer to get rings sized or repaired when their customers need it.
Electronics Repair– Not many pawn shops offer electronics repair, but there are some that do.
In these cases, the pawn shop is normally a very affordable option for this service as they typically either have someone on site who does it full-time, or they have a special deal with a local facility and can get you a reduced rate for the repair service.
These are just some of the things that the average pawn shop may be able to do for their customers.
Ultimately however, the main purpose of a pawn shop is to make short term loans on items that you bring in. You’ll be able to pick up your items later, but it gives you the ability to pay whatever bills came in in-between then and now.