Posts Tagged ‘Economic Indicator’
Tuesday, July 12th, 2011
From Go Banking Rates Dot Com
Are Pawn Shop Owners the True U.S. Economists?
By Casey Bond
Just about every industry took a hit from the recent recession and most businesses are still struggling to rebound. That is, except for pawn shops. Interestingly enough, they have actually been on the upswing ever since our economy took a turn for the worse. In both the good times and the bad, however, pawn shop owners are down in the trenches with their customers–typical Americans like you and I–which may give them the most authentic and uncensored look into the true state of our economy.
So if you’re wondering whether the U.S. is really on its way toward economic recovery or if we’re doomed to keep our belts tightened for years to come, you might want to visit your local pawn shop to get the real answer.
How Pawn Shops Work
Once viewed as a seedy location to unload stolen goods and hock valuables for gambling money, pawn shops have been cleaning up their image and becoming the go-to among middle- and even upper-class Americans for discounted goods and small loans.
Their new found popularity has even sparked a wave of reality shows, including the History Channel’s Pawn Stars, in which viewers can watch the shop’s employees haggle over everything from Superbowl rings to buried treasure. But a pawn store can provide much more than mindless entertainment and there’s plenty these establishments have to offer the everyday consumer, too.
Here’s how a pawn shop operates: Let’s say you need a loan, but don’t have the credit or bank account necessary to get one (or you simply want an alternative). You can take a valuable item you own to a pawn shop and offer it up as collateral. The pawnbroker will then lend you however much he or she deems that item to be worth. You both agree on a term–usually, 30 days–after which you come back to repay the money, plus interest, and have the item returned to you.
Now what if you can’t pay back your loan? The pawn broker can put your valuable item up for sale in their shop with the goal of selling it to recoup the money they loaned you (and hopefully make a profit). You don’t get reported to the credit bureaus or end up with bill collectors on your tail, you just give up the item you pawned.
You can also sell items to a pawn shop if you’re interested in straight cash rather than a loan. These days, a lot more people are interested in both.
Living in a “Pawn Shop Economy”
While there are more than 13,000 pawn shops throughout the country, they are mostly small, privately-owned businesses that do not report their earnings publicly. That makes this industry extremely difficult to track. Even so, the three publicly-traded pawn companies have recently reported significantly increased earnings.
For an industry that thrives on making short-term loans and selling goods at a discount, it’s a strong indicator of the financial times in which we live.
However, it isn’t just an increase in profits that has contributed to the idea pawn shops serve as an economic barometer. Pawn shop employees get a first-hand look at current trends in consumer borrowing and spending, as well as various industry ups and downs.
“We went through two solid years where we had an increase in loans. And I could see the construction business grinding to halt by all the tools on my sales floor,” explains Westside Pawn manager, Susan Sherrod.
A more affluent crowd has been coming through pawn shop doors to join the usual suspects these days, too, hoping to pawn and sell nicer stuff. As Pat Schneider writes for The Cap Times, “unlike payday loan stores, which have the feel of banking branches, a pawn shop’s eclectic mix of items and their owners offers a dramatic window into life during the economic downturn.”
Pawn Shops Serve as Alternative to High-Interest Payday Loans
Payday loans have become much more popularized as a result of the recession, which left a huge number of people with reduced or no income, increasing the demand for short-term loans. Unfortunately, it also left these same people with damaged credit. Combined with tightened lending standards, it has become harder than ever to obtain a loan.
So it’s pawn shops that have come through to serve the needs of the unemployed, unbanked and otherwise down and out.
Additionally, pawn customers can enjoy the fact that there isn’t any credit check involved in getting a loan, and if the loan can’t be repaid, there are no long-term repercussions. Not to mention, it’s hard to obtain a loan for $60.
So whether you’ve hit hard times and need some cash or are simply interested in the fate of the U.S. economy, you may find that what you’re looking for isn’t at a big bank, but the local pawn shop.
Casey Bond has a long professional history in the finance industry. She worked as an assistant in a successful financial planning firm for many years while obtaining her B.A. in English. She then went on to obtain a degree in Publishing and was eager to change career paths.
That’s when Casey joined the Go Banking Rates team, ready to meld her interest in finance with her passion for writing. Now she strives daily to bring readers the most compelling and topical banking information while battling a personal addiction to shoes and handbags. She is making progress and takes it one day at a time.
Tags: consumer credit, Economic Indicator, Pawn Loans, Pawn Stars, pawnbroker, pawnshop
Posted in Pawn Ecomomics | No Comments »
Monday, June 20th, 2011
From Newsweek Dot Com
It’s a Hot Time to Be a Pawn Star
Hocking your diamond ring used to be shameful business.
Now everyone’s doing it.
by Gary Rivlin
To gauge the state of our economy, you could talk to the economists and other so-called experts. Or you could attend the annual pawnbrokers’ convention, as I did, held last week at Caesars Palace in Las Vegas. There, I met Lee Amberg, his face sunburned from competing in the annual golf tournament that these days opens every Pawn Expo.
A 23-year industry veteran with a pair of pawnshops in suburban Chicago, Amberg says he could tell as far back as 2006 that hard times were coming. “Suddenly we saw our demographic expanding,” he says. “We had more customers coming to us from middle-class communities and even upper-middle-class communities. We saw the erosion of the economy before you were even reading about it.”
Except, who listens to a pawnbroker? “We have our thumb on the true pulse of the economy,” Amberg says with a sigh, “but we’re laughed at or ridiculed because we’re in the pawn business.”
These are fat times for the pawn industry—in no small part because these are hard times for much of America. Pawnbrokers are lending money to a new breed of customer—the kind who drives up in a sports car, lugging a large flat-screen TV to hock—and it’s not like their traditional clientele are any better off than they were a few years ago. Pawn is even hot in the popular culture, as reality TV has spawned no less than three shows starring pawnbrokers.
At first glance, the Pawn Expo could have been any trade show of its kind: booths for exhibitors selling their wares (diamond and gold buyers, mainly), breakout sessions for the more studious conventiongoer (“10 Successful Steps to Becoming a Watch Guru”), boozy parties at night. And the brokers—1,300 attendees in all—made for a friendly, casual bunch, dressed in resortwear for the 100-degree Vegas heat. Still, most people think of the corner pawnshop as a forbidding place, dingy and depressing and smelling something like their grandmother’s attic. “I would describe image as our biggest challenge,” says Kevin Prochaska, who took over as president of the National Pawnbroker Association at this year’s meeting.
But changing that image is no easy task for these lenders of last resort. “If someone is coming to us, that’s the definition of a bad day,” a pawnbroker named Kathy Pierce told me. Apparently, there have been a lot of bad days for the people living near the two stores she and her husband own in central Illinois. The loan volume at both “is higher than it’s ever been,” she says.
If you’re a fan of the hit show Pawn Stars, you might think that what pawnshops mainly do is buy used stuff. But the vast majority are really loanmakers: that watch or wedding ring (usually the same watch or ring hocked the last time) serves as collateral for a loan that usually lasts from a few weeks to a few months. The amounts borrowed are typically small—$100 or less, just enough to make ends meet until the next payday. Four out of every five customers successfully pay off their loan and retrieve the item they’ve hocked.
But a pawn loan isn’t cheap. The fees charged work out to an annual interest rate of between 50 and 250 percent a year, depending on the state. Prochaska, the association president, defends the high interest rates by noting that “a lot of overhead goes into every loan.” That’s because pawnbrokers must store whatever a customer brings in—jewelry, mostly, in big cities, but plenty of weed trimmers, fishing poles, and power tools in less-urban areas. And there’s no guarantee that the pawnbroker will ever be able to sell the items if the borrower defaults. For some pawnbrokers, the sale of forfeited items has accounted for half their revenue, and a lousy economy means they get stuck with more inventory.
Yet for most pawnbrokers, the spike in loan volume over the past few years—and the corresponding increase in the fees they collect—has more than made up for the decline on the retail side. “It’s an awesome time to be in the lending business,” says Nancy Martin, a pawnbroker from North Carolina who has had her own shop since 1981. “Whether you’re talking about our traditional customers or the new people coming in the door, people are really hurting.”
Tags: consumer credit, Economic Indicator, Gary Rivlin, Las Vegas, National Pawnbrokers Association, Pawn Loans, pawnbroker, pawnshop
Posted in Pawn Ecomomics | No Comments »
Monday, May 10th, 2010
From Philly Dot Com
High-end payday loans
By Harold Brubaker
Inquirer Staff Writer
From his pawnshop at 10th and Sansom Streets in Center City, Tod Gordon has an unusual window on credit and the economy.
Carver W. Reed & Co. Inc. is not the stereotypical pawnshop where the walls are lined with guitars and the glass cases are filled with cameras.
Instead, Carver W. Reed, which celebrates its 150th anniversary Tuesday, specializes in loans that use diamond and gold jewelry exclusively as collateral.
Gordon said his business had catered to wealthier clients for decades. Even so, he said, in 2008 and 2009 he saw a huge increase in the number of business owners pawning the gold watches and diamond jewelry they had bought in better days.
They needed the money to pay their employees, Gordon said, and could not borrow it from a bank.
“The number of people that have come in from walks of life that I never expected to see has been overwhelming,” Gordon said. His grandfather bought the business in 1949 from descendants of the founder and kept the name.
Most customers who started borrowing from him during the financial crisis are still playing catch-up, he said.
On the plus side for the economy, he noted, wholesale and retail demand have improved for the jewelry he ends up selling because loans are not repaid.
“I’ve noticed a dramatic swing in the last three months. People are starting to come back out again and spend money and buy again,” said Gordon, who zealously guards his clients’ privacy.
He also declined to disclose the value of his outstanding loans because each is backed by jewelry worth three or four times as much as the loan.
The Pennsylvania Department of Banking regulates pawnbrokers and limits the amount of interest that can be charged to 3 percent per month, Gordon said. That adds up to a high rate over a year, but for a month a $10,000 loan costs $300.
“You can’t go to a bank to get that,” Gordon said.
Building contractors take advantage of such financing to make payroll and buy supplies, he said.
“Their stuff is back out in 60 days max,” Gordon said. “I have many contractors; they are all big loan people.”
There are 57 licensed pawnshops in Pennsylvania, the same as three years ago, according to the state Banking Department. New Jersey has 35 licensed pawnbrokers.
The 2,600-member National Association of Pawnbrokers, based in Keller, Texas, says that most pawnshops are family businesses and that they are regulated by all the federal laws that apply to other financial institutions, such as the Truth in Lending Act and the Bank Secrecy Act.
“It’s an intriguing business,” Gordon said. He has worked full time at Carver W. Reed since graduating from college in 1977 and is thrilled to have a daughter in the business now.
He clearly enjoys people and the insights he gains on the economy. He talked about a new customer, a manufacturer of furniture for boats, who has been in business for 38 years and for the first time could not make payroll.
“That, to me, was a real sign of a trickle-down effect,” Gordon said.
“Everybody says, ‘The cruise lines are hurting,’ but nobody thinks about the guy making furniture for the cruise lines.”
Tags: consumer credit, Economic Indicator, Pawn Loans, pawnbroker, pawnshop, Philadelphia
Posted in Pawn Shop Stories | 4 Comments »
Friday, March 5th, 2010
By Bobbi Dempsey • Bankrate.com
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.”
Tags: consumer credit, Credit Crunch, Economic Indicator, Pawn Loans, pawnbroker, pawnshop
Posted in Pawn Ecomomics | 2 Comments »
Tuesday, September 15th, 2009
From Ozarksfirst.com
Pawn Shops Play Interesting Role In the Recession
Reported by: Kate Stacy
Monday, Sep 14, 2009 @09:52pm
From paying bills to cashing in on a bargain, pawn shops are playing an interesting role in this recession. Some people get information from their stock broker, others learn about the recession’s affect from their pawn broker.
“In June, people were picking up pawns,” says Norm Dias at Gold Digger Pawn in Springfield. He’s not your typical economist. But he has his finger on the pulse of the recession. “It’s taken another turn. People are bringing stuff in.”
To fill their wallets, customers are willing to put their items on these shelves.
“More middle class people than normal,” says Brandon Reynolds of the crowd he’s seeing at Gunsmoke Pawn. Still, he hasn’t noticed the sign that things have hit rock bottom.
“You can tell it’s bad when they bring the shotgun, wedding ring, stuff like that.”
Store managers say there are other items that indicate the difficulty in one specific industry.
“We have tools,” says Reynolds. “No one is buying them. We’re not taking them. There’s just not a market for them right now. Everybody’s getting rid of tools left and right. Nobody’s needing them, there’s no construction work. It’s tough times for that sector.”
That’s good news for buyers.
“If you’re looking to buy a construction tool, now’s the time to do it,” says Dias. “I mean, you’re paying pennies on the dollar.”
While most tools end up on the sale rack, managers say they really work to ensure other items do not.
“75% of people come back for their stuff,” says Reynolds.
“We want you to come back,” adds Dias. “We want to float a loan to make it to pay day so you don’t lose your item. We don’t want to end up with it.”
While tools and gold are being pawned, people who are spending are putting money in guns. Staff members says sales are not as high as right after President Obama’s election when there was worry about gun laws, but it’s still double what they typically see.
Competition in the market for selling pawned items is tough. There are a few stores that are closing shop. Others are working to become more marketable by selling items in online auctions.
Tags: consumer credit, economic crisis, Economic Indicator, Pawn Loans, pawnbroker, pawnshop
Posted in Pawn Shop Stories | No Comments »
Wednesday, July 22nd, 2009
From borro.com, the first truly online pawn shop in the UK:
Attitudes to Pawnbrokers Are Changing Fast
July 22, 2009 · Filed Under Short Term Loan
Attitudes to Pawnbrokers Are Changing Fast
Before the Second World War, Britain had more pawnbrokers than it had pubs. Then the welfare state happened! Now attitudes are changing again. The rise in popularity of car boot sales and eBay has made people more comfortable with dealing in their own possessions.
These days, it’s cool to turn your assets into cash online, and also to use your personal assets to negotiate the short term secured loans and personal loans that the banks won’t touch since they gambled all our money on spurious get-rich-quick schemes.
Even high net-worth individuals, fed up with the attitude of credit-crunched banks are using their assets as security for collateral loans. Paul Aitken, CEO and Founder of Borro.com, the world’s first online pawnbroker commented, “It’s not just brand names like Ferrari, Rolex and Bulgari we’re seeing. In recent months we’ve advanced asset-backed loans against sculptures and paintings by some of the the most distinguished names you’ll hear in auction rooms, as well as some extremely rare military, entertainment and sporting memorabilia”.
Because Borro.com operates online 24/7, the benefits of pawnbroking are now available to a more upscale and discerning clientele – in a totally discreet, convenient and safe manner. And it also fast! All goods are shipped by pre-paid, fully insured courier, and all monies are transferred electronically, into any UK bank account nominated by the borrower.
Borro.com is UK government regulated, and all Borro contracts are approved by the Office of Fair Trading. Borro contracts are totally straightforward and easy to understand. Unlike many alternative short term loan contracts, Borro never levies any nasty hidden extras, such as start up fees, admin charges, early settlement fees (you can pay off a Borro loan whenever you like, and you only pay interest during the time you use the loan), late payment fees or default penalties.
With a Borro loan, you can never get in over your head, or take on a debt that you can’t afford. Even if you decide not to extend or pay off your Borro loan, you will be given ample notice if your pledge needs to be sold to settle your loan, and any cash left over is sent straight back to you.
With Borro.com, there are never any credit checks, intrusive questions, bureaucratic delays, debt collectors, court actions, bailiffs, asset seizures or repossessions – ever!
If you want easy cash, and fast cash at low rates in the form of an affordable, low interest rate loan, visit online pawn shop, Borro.com. For a cheap, no risk short term loan, phone leading short term loan provider, free, on 0800 756 9877.
Tags: borro.com, consumer credit, Economic Indicator, Pawn Loans, pawnbroker, pawnshop
Posted in Pawn Shop Stories | No Comments »
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