If you’ve found yourself needing some quick cash recently, you may have considered heading to a pawnshop. You’re not alone. The bad economy has prompted many people to visit a pawnshop for the first time.
“We’re seeing more people who have never been in a pawnshop before looking for short-term solutions without having to sell the farm,” says Rick Harrison, whose family owns the Gold and Silver Pawnshop in Las Vegas and stars in The History Channel series, “Pawn Stars.”
You shouldn’t feel afraid or embarrassed about heading to a pawnshop, but there are some things you need to know.
Don’t believe the bad image
Pawnshops aren’t the shady, scary places they often appear to be in the media. “Pawnshops have been unjustly vilified by the main stream media, and so most people perceive pawnshops to be dirty and seedy,” says Harrison.
Instead, pawnshops are regulated by 12 federal laws plus numerous state and local laws,” says Emmett Murphy, spokesman for the National Pawnbrokers Association, or NPA. “The majority are clean, well-lit stores run by people who pride themselves on providing good customer service.” Murphy advises checking with the local Better Business Bureau, or looking on the NPA’s Web site for member stores in your area.
Getting the loan
Here’s how a pawnshop transaction works:
Pawnshops offer collateral-based loans — meaning the loan is secured by something of value. You bring in something you own, and if the pawnbroker is interested, he will offer you a loan. The pawnbroker then keeps your item until you repay the loan. The loan amount will likely be a small fraction of the item’s actual value.
You can sell your item to the pawnshop outright, but pawnbrokers are less enthusiastic about these transactions because loans offer much more profit potential for the pawnbroker.
You must receive a pawn ticket. Don’t lose this! Not only is it the receipt for your item, but it also summarizes the terms of your loan: fees, expiration date, description of your item, etc.
Repaying the loan
You have two choices on repayment:
Return to pay the balance — including the loan amount plus all added fees — before the deadline, which is usually one to four months after the initial transaction.
Don’t return and the pawnshop keeps your item. Aside from losing your item, there are no other consequences: no collection action and no affect on your credit report. On average, though, 80 percent of all customers do reclaim their items, according to the National Pawnbrokers Association.
In some locations, you can extend the loan period by up to several months, but you’ll incur additional charges.
The interest rate explained (… sort of)
The dollars and cents of pawnshop loans get a little complicated because: a) rules regarding the fees vary widely from state to state, and b) it’s not a cut-and-dried interest rate.
The term “interest rate” can be very confusing, so it’s better to think of total allowable “finance charge,” says Steve Krupnik of South Bend, Ind., creator of the Pawn Shop Advisor coaching program and author of the book “Pawnonomics.”
“Pawnshop loans are nearly all state-regulated, and ‘finance charges’ can vary from 5 percent per month to 25 percent per month. In Indiana, the ‘interest rate’ is capped at 36 percent APR or 3 percent per month, but pawnshops can charge an additional 20 percent per month service charge, making the total allowable finance charge 23 percent per month,” says Krupnik.
In New York, the maximum interest rate is 4 percent per month, and a service charge of up to $10. The interest rates may seem steep, but Murphy says these aren’t meant to be a substitute for bank loans.
“These are what we call ’safety net loans’ and are usually for life emergencies.” The typical fee, he adds, is often lower than the cost of a bounced check or a disconnected utility.
To learn the maximum rates allowed in your area — along with any rules regarding pawnshop transactions — check your state’s Web site; most likely, the information will be in the consumer protection section.
The bottom line: Make sure the pawnbroker clearly explains all the fees involved in your loan before you finalize the transaction. These terms also should be listed on your pawn ticket.
What pawnshops do — and don’t — want
When considering pawning something, keep these tips in mind:
Don’t: Offer anything outdated, difficult to store or cheaply made, Krupnik advises.
Do: Go with jewelry or coins, Harrison suggests. Other good choices, according to Krupnik, are firearms, high-quality tools and musical instruments.
Be prepared for red tape
The pawnbroker is legally obligated to confirm that you are the legal owner of the property.
“They will ask you enough questions about your property to become comfortable with the fact that you own it,” says Krupnik. “Do not be offended; the pawnbroker is just trying to make sure that both you and the property are legitimate. Also, if you do business with the pawnbroker, expect to have to show a government-issued ID. It is required by law.”
THE mega-rich are feeling the credit crunch pinch — pawning designer watches, super cars and even an aeroplane to survive the recession.
Pawnbroker Paul Aitken, 37, revealed he has been offered the amazing haul of goodies by hard-up bankers, premiership footie stars and desperate property developers.
He has currently collected six Rolex watches, two Ferraris, a Porsche — and the aeroplane — after they were traded in for cash.
Both Ferraris — F430 F1 paddle-shift models worth a total of £270,000 — were pawned by bankers who lost their jobs.
Crisis
The £75,000 175mph Porsche 911 Carrera 4S was traded in by a property developer whose assets crashed, leaving him desperate for capital.
While Mr Aitken acquired the aeroplane, a French-built two-seater Cap 10 aerobatic stunt plane worth £100,000, four months ago when its owner fell on hard times.
The Rolex watches are among more than 1,000 designer timepieces, worth a total of £1million, which have been used as deposit for pawn loans.
Among them are a Breitling Crosswind diamond set worth £3,000, a £33,000 Lange & Sohne Flyback Datograph gents wristwatch in 18ct rose gold, and a £20,000 Patek Philippe 18ct gold gents wristwatch.
Mr Aitken, managing director of online pawnbrokers www.borro.com, said: “We’ve seen the biggest economic crisis hit this country for years, and everyone is feeling the disastrous effects.
“When someone rang us asking to pawn his Ferrari we thought he was joking.
“This really shows how hard the recession has hit people - even those who are well-off have had to adjust their standard of living.
“Last week a newly married man gave us his Rolex watch his wife bought him as a wedding present.
“But he isn’t alone, as many wealthy businessmen are having to take extreme measures once they’ve realised they aren’t able to maintain their lavish lifestyles.
“And that might mean giving up the keys of their Ferrari, Porsche or plane for some much-needed cash.”
From the Rochester Democrat and Chronicle
Matthew Daneman, Staff writer
The shelves of Park Avenue Trading Post are packed with what once was your stuff — a wall of DVDs and video games that you used to watch and play, stacks of electronics and power tools you used to use, musical instruments and wristwatches you once had.
“A lot of broken stuff we’ll still buy — broken PlayStation 3s, broken Xbox 360s, some broken electronics still hold a good amount of value,” said Benjamin Dodge, manager of the Rochester secondhand store. “For replacement parts, or some are an easy fix. If we think we can sell it, we’ll probably buy it. Bikes won’t move in the winter. Skis don’t ever move. Golf clubs are hard.”
On a daily basis, people go into secondhand stores, jewelry stores and pawnshops around the Rochester region with their belongings and walk out with cash in hand. And while economic downturn has wreaked havoc on the livelihoods of millions, it has done gangbusters for the resale industry. According to the Association of Resale Professionals, the number of the nation’s resale stores has grown 5 percent annually over the past three years. Today there are more than 25,000 resale, consignment and thrift stores in the nation, according to the trade group.
“There’s not been a time in the U.S. since the Great Depression that there’s been this kind of demand for pawnshop goods and services,” said Steve Krupnik, an Indiana-based pawnbroking industry consultant and coach and author of Pawnonomics. “The industry is extremely busy.”
Because of the high price of gold and the down economy, “We’ve been so busy every day, it’s been unbelievable,” said Betty Frey, who works at Jewelry & Coin Exchange on West Ridge Road in Greece. The price of gold reached multiple record highs last week, including Thursday’s price of $1,055.40 per ounce on the New York Mercantile Exchange.
And pawnshops and secondhand stores have become big, Wall Street-style business. Texas-based Cash America International Inc. — which operates Cash America Pawn, SuperPawn pawn stores and Cash America Payday Advance and Cashland short-term loan operations and Mr. Payroll check-cashing centers — had revenues of $1 billion in 2008 and profits of $81 million.
But the economics of selling an item to a secondhand store or pawnshop depends on how quickly you want the money, how willing you are to go through the pains of selling and shipping the item, and how popular the item for sale is, Krupnik said.
Pawnbrokers and secondhand retailers typically will give 50 percent to 75 percent of the fair-market value of an item — more if it’s in high demand, he said.
When getting rid of a possession through such a store, Krupnik said, a key first step is to have some idea of what the market value is. “That can be easily found on the Internet,” he said. “It’s never been easier to value items.”
When people balk at the money offered at Oxford Trading, the Rochester secondhand store will show them the going prices found online, owner Mark Landon said.
“Then they’ll understand where we’re coming from,” he said. “‘I can’t believe this price, this is what I got for it new.’ Well, it’s not new anymore.”
Most of the jewelry bought at Jewelry & Coin Exchange ends up resold to refiners and melted down, and the price paid reflects the carats, the weight and the going price for gold that day, Frey said. The store does resell some jewelry in its retail location.
“We’re one of the ones that pay the best around,” she said. “People can’t believe how much more we pay than some other shop they went to.”
But the best way to get maximum value for jewelry is to try to sell it to another consumer, said Jerry Ehrenwald, president of the International Gemological Institute.
Those options can range from having a jewelry store sell the goods on commission to going through some route such as eBay, Ehrenwald said. Selling it directly through some kind of advertisement, though, could invite robbers more than buyers, he said: “You don’t want to advertise you have jewelry for sale at your home.”
Dodge said the money that Park Avenue Trading Post offers for merchandise brought in can vary widely.
“It depends on the condition. The age plays a huge role,” he said. “Say we’re talking about digital cameras — a Nikon that’s two years old and a Kodak that’s two years old. Kodaks don’t hold their value at all. The price plummets.”
Original packaging and instruction manuals, meanwhile, are a big plus, Dodge said.
“After a while, it’s not too hard to tell the quality,” he said. “The brand names go for a little bit more. We have a few pricing guidelines we go by online. We have guidebooks every now and then we go through.”
Landon said business — at least of people selling goods — picks up heavily at the end of the month. But the recession has clamped down on some traffic in what is typically a two-way street, he said.
“People think the pawnshops are doing so well. They are in a sense, I guess, but I’m buying a lot of things from people when they’re hurting, but no (customers) are buying,” Landon said. “People can say business is booming, but it’s … booming in one direction.”
Councilwoman Lois Tarkanian said she isn’t sure whether residents want more pawnshops in the area.
She said her perception of pawnshops used to be that they catered to unsavory elements. But she said her view has changed. And as the economy has worsened, more people who never before used pawnshops are in need of their services, she said.
Company Seeks to Revolutionize Pawn Industry by Offering the First Web-Based Pawn Shop in the United States
DENVER–(BUSINESS WIRE)–As a result of the economic downturn, a large segment of the population is unable to access credit. Internet Pawn, a new online pawn service launched today by founders with more than two decades’ experience in the pawn industry, provides consumers a unique opportunity to discreetly leverage the equity they have in their personal valuables to solve immediate cash flow needs. Internet Pawn:
•Provides loans based on the collateral of customers’ personal valuables – customers do not have to sell sentimental assets or valuables in order to receive cash
•Requires no credit checks or proof of employment to obtain a loan, given the collateral-backed loan agreement
•Offers cash quickly with no payments required for six months and gives customers the option for credit without negative consequences to their credit scores
•Guarantees premium loan amounts based on proprietary valuation technology and decades of industry experience
•Returns excess sales proceeds to the original owner
•Uses the latest in security standards, and partners with such industry leaders as Wells Fargo, Equifax, Verisign, Westec and PawnGuard, so consumers can trust their assets and personal information are safe and secure
“Internet Pawn puts a whole new twist on the concept of pawn loans, making pawn more attractive, affordable and convenient to a broader group of customers,” said Todd Hills, co-founder, president and CEO of Internet Pawn. “Internet Pawn is ideal for anyone with a valued personal asset and a temporary cash flow need. This can be someone who can’t rectify a financial challenge in 30 to 90 days, but will be in a different financial position in six months to one year; entrepreneurs without access to lines of credit; customers who have extended their credit over the past few years or anyone experiencing an unexpected household emergency.”
“Internet Pawn derives revenue from the interest rate of our loans. It is our goal to return 100 percent of the items used as collateral to our customers,” said Jim McHose, Internet Pawn’s co-founder and CFO. “Our terms allow consumers time to get on their feet financially using valuables they might otherwise have to sell so that they can repay their loan. If they opt not to repay and we sell their item, we return excess proceeds from the sale to the consumer.”
Internet Pawn will lend against any item made with precious metals, which includes almost all jewelry (rings, bracelets, necklaces, earrings, chains, class rings, cuff links, etc.), gold or silver bars or coins. The company also lends against heirlooms, watches, precious stones, collectibles and artwork. Loan transactions can range from $500 to $100,000, but the typical loan amount ranges from $1,000 to $5,000.
How Internet Pawn Works
Internet Pawn designed a process that is convenient, secure, simple and fair for the consumer. Through an online transaction, customers can obtain asset-based cash loans within 24 hours. The process includes an online application, evaluation and verification of merchandise and shipment through FedEx.
Through e-mail and phone conversations with customers in English or Spanish, Internet Pawn determines if collateral items have enough value to warrant a requested loan. If so, customers ship items to Internet Pawn’s secure location through FedEx. Once Internet Pawn receives the item, the company secures that item in its vault and delivers the loan proceeds to the user. Internet Pawn uses the latest in security standards throughout the process, including recording of all employee interactions with an item via video surveillance. When a loan is repaid, the item is returned. If a customer chooses not to repay the loan and forfeits the merchandise for sale, Internet Pawn will sell it and return excess proceeds to the customer.
Loans are remitted electronically directly to a bank account, or if a customer chooses, Internet Pawn can mail or ship a check overnight. After a loan is made, customers have six months to decide if they would like to repay the loan, extend the loan or not repay the loan. The standard loan term is 180 days, which is roughly six months. Loans can be extended if a customer chooses and can be repaid anytime.
About Internet Pawn
Internet Pawn is the first Web-based pawn shop in the United States. As such, it is revolutionizing a 3,000-year-old industry by guaranteeing secure, confidential, asset-based loans with consumer-friendly rates and terms online. Unlike other online lenders, Internet Pawn offers loans based on the collateral of customers’ personal valuables. The company offers cash quickly with no payments for six months. A member of the National Pawnbrokers Association, Internet Pawn guarantees a premium value based on its experience and proprietary valuation technology, and all transactions are conducted from the privacy of the customer’s home. For more information, go to www.internetpawn.com.
It didn’t take long for the lure of free government money to start taking its toll in the US. I’m already receiving reports from pawnbrokers around the United States who are experiencing an uptick in their pawn loan activity from new customers who drive up to the pawn shop in… you guessed it, a brand-new car. Along with a brand-new payment they had not budgeted for.
Bear in mind, these new pawn loan customers traded in their “paid for” clunker solely because of a government run program doling out taxpayer money, billions in taxpayer money, to induce these unsuspecting customers into an unplanned large purchase strapping them with yet more debt and little regard to the ability to make the monthly payment for the next several years.
If this sounds familiar to you, it should. This type of lending activity in the US is at least partially to blame for our current credit crisis, mortgage bust, and the real estate bubble exploding like a cannon. Will pawnbrokers be able to keep these new car consumers off the repossession list of the lenders? Time will tell, it remains to be seen. But at least for now, the pawnbroking industry will keep these cash for clunkers recipients driving instead of staring at their empty driveway wishing they still had the keys to their paid for clunker.
While this young lady may have some of her facts straight, her reality is a bit skewed. She has obviously never been in a position where she has been exempt from mainstream forms of credit, had to pay for a bounced check fee, a utility reconnect, or even experienced difficulty purchasing a tank of fuel to get to work for the rest of the week. Pawnshop loans have their place in society, especially with current credit markets. Why condemn them when no reasonable alternative is offered or available? This type of soap box thinking proves most harmful to the consumers they are actually trying to protect. Pawnbroking is still the most civilized form of short-term credit.
WICHITA — Central Kansas pawn shops report giving out more short-term loans to cash-strapped customers willing to trade wedding rings and other luxury items.
Money Town Pawn Shop in Wichita recently loaned Lisa Boland money in exchange for her wedding ring so she could take an emergency trip out of town. She got back the ring after paying back the loan.
National Pawnbrokers Association vice president Dave Crume says he’s seeing an increase in these loans at A-OK Pawn in Wichita.
He estimates loans have increased by 15 to 25 percent.
Money Town owner Barry Ellis says about 70 percent of customers eventually buy their items back.
