Posts Tagged ‘Pawn Loans’
Monday, November 5th, 2012
From Daily Mail Dot Co Dot UK
The rise of designer pawn
By Kathryn Knight
In these asset-rich, cash-strapped times, more and more of us are banking on a new breed of high-end moneylenders. Kathryn Knight investigates
When Tiffany Jackson’s husband James was made redundant from his job in the City last year the couple quickly felt the pinch. They put their six-bedroom home in Weybridge, Surrey, on the market, but while they waited for it to sell, money was tight. ‘A couple of credit-card bills came in,’ recalls Tiffany. ‘Normally it wouldn’t be a problem with my husband’s salary, but we were struggling.’
Traditionally, the solution might have been a bank loan, or a begging phone call to friends. Instead, Tiffany, 32, a housewife who is used to dressing in designer labels, took a different tack. ‘A friend suggested I pawn a couple of my more expensive items. Initially I was taken aback because I’d never come across the idea before – you associate the word with the seedier end of the high street. But it made sense. I may not have much going into my bank account, but I had a wardrobe full of expensive stuff. The shop she mentioned was just down the road, so I decided I had nothing to lose by going in.’
The following day, Tiffany found herself in the offices of a pawnbroker handing over an £18,000 crocodile-skin Chanel handbag – a present from her husband – and her £6,000 Rolex watch. In return, she got a cheque for £4,000 – enough to settle the credit-card bills that were worrying her. She has seven months to repay the money at a monthly interest rate of around five per cent, meaning she will need to find more than £5,400 to get her items back. However, she is confident that the imminent sale of her house will free up her cash. ‘But if it doesn’t, although I loved my watch and bag, there are worse things to lose,’ she says. ‘As long as you’re not emotionally attached to whatever you’re handing over it’s a stress-free way to get cash.’
Women such as Tiffany are not the sort of clientele that you traditionally associate with pawnbrokers. Nevertheless, in these asset-rich, cash-poor times they are increasingly emerging as their lender of choice. Last year, the National Pawnbrokers Association – whose membership has grown from 530 to 1,800 in the past five years – reported a 15 per cent rise in business, in part fuelled by this new breed of high-end customer. Then there’s the internet, where online brokers offer loans against everything from jewellery to fine wine. At borro.com loans of up to £1 million are available, while at pawnbrokeronline.co.uk applicants can be offered money after a transaction lasting as little as a minute.
Meanwhile, over at Prestige Pawnbrokers in Weybridge (a commuter belt with some of the UK’s most expensive houses) designer handbags and dresses – Hermès, Chanel, Dior – jostle for space with expensive jewellery in the locked units behind the discreet shop front that, with its plain counter and sofas, looks more like a bank. The most interesting stuff isn’t on the premises, but in underground vaults containing rare books and paintings, and secure garages that host sleek rows of prestige cars. All of them have been pawned by their owners in exchange for ready cash.
Owner James Constantinou, a former property developer, set up the company in 2009 in the early months of the recession after realising that there was a gap in the market providing loans to the cash-poor asset-rich. ‘I knew people living in million-pound houses with Ferraris on the drive who were short on funds – people who had built up wealth in cars and fine paintings but couldn’t use them as collateral at the bank,’ he says. ‘They come in here and within ten minutes they can walk out with a large amount of cash or a bank draft.’
This is, says James, in direct contrast to the banks, who introduced stringent new credit policies in the wake of the recession. Such is his flexibility, he adds, that he offers something known as ‘bill of sale’ loans on cars – also called ‘logbook loans’ – which allows him to take legal charge of a vehicle while the owner continues to drive it. ‘Our interest is registered with the High Court, and the owner pays back the loan monthly, rather than at the end of the term, so it’s a bit like getting a car on finance. It’s an attractive option for people who need to free up money but also need to keep their car on the road.’
Moreover, it is women who are helping to fuel James’s booming business. ‘When we opened women rarely came in unaccompanied by a man, but we’ve seen a huge shift in that sector. Now they form around 65 per cent of our client base. Before, these women could have walked into the bank and said, “My house is worth five million, I just want a few grand on my bank card”, and that would have been fine, but now that’s not possible unless you’re in full-time employment, which doesn’t apply for many of these women. So they come here.’ What are they spending the money on? Anything, it seems – school fees, dentistry work, credit-card bills, even to start their own business.
‘If you’re not attached to what you hand over, it’s stress-free cash’
The rise in popularity of pawnbrokers doesn’t come as a surprise to those in the know either. Jasmine Birtles, personal finance expert from moneymagpie.com, agrees that the industry has now attracted a new kind of client – the ‘secretly poor’. ‘These are the people who appear to be doing well – the children in private school, the expensive cars on the drive – but behind the scenes they have cash-flow problems, which means they are behind on the mortgage and can’t get any money from the bank. For them, the sort of discreet service offered by a pawnbroker can be an attractive proposition.’
A pawnbroker typically lends up to 50 per cent of the value of the item on a seven-month contract, with interest rates set at anything from 1.49 to nine per cent each month (compared with an average 19.5 per cent annually on a bank overdraft and 17.3 on a credit card). The contract is redeemable at any point, but if the customer can’t repay the loan plus interest at the end of the term, the pawnbroker keeps the items and sells them to recoup the value of the loan – either through their own shop or via auction houses and specialist dealers. Nonetheless, James insists that customers know exactly what they’re signing up for. ‘There are no hidden charges,’ he says. ‘And for the first three months our terms are not dissimilar to a bank, especially when you factor in the fact that we have no arrangement fee.’
James will consider anything of worth, using a team of specialists to assess an item’s value. A Lowry painting, a Picasso and a rare book collection worth half a million have all passed over his counter, latterly joined by two rare vintage wedding dresses. They belonged to 45-year-old single mother Stella Brody, who pawned her dresses to buy stock for her antiques business when her bank refused her a loan. ‘My supplier had new goods, so I needed to act quickly,’ she says. ‘Someone suggested the pawnbrokers and the wedding dresses sprang to mind.’ One was Elizabeth Arden and one Dior, the former belonging to her mother and the latter originally for sale in her shop. ‘I didn’t want to part with them, but I knew that once I got my new stock I’d recoup my money quickly and I was right. I was given £7,000 and three months later, I was able to go in and pay £8,000 to get them back. It’s high interest, but I viewed it as a short-term cash injection that enabled me not only to survive but to thrive.’
According to James most customers, like Stella, hope to see their goods again. ‘With smaller items such as jewellery, 60 to 70 per cent of owners come back, while on bigger items, such as cars, it’s 85 to 90 per cent.’ Like most pawnbrokers, he prefers to return items than sell on. ‘If we have to sell we’ve effectively lost a client,’ he says. ‘Whereas we get customers who come back and pawn the same items two or three times whenever they need a short-term injection of cash.’
Nor is Stella the first woman to turn to the pawn merchants to help her business (in 1971, Diane von Furstenberg famously pawned a diamond ring to launch her now iconic wrap dress). However, not everyone is keen to bang the drum for this new breed of lending, among them Jasmine Birtles, who cautions against anyone relying on it too heavily. ‘In general, I am not pro the pawnbroking industry as there are a number of dodgy dealers out there and interest rates are high,’ she says. ‘They’re not as dangerous as taking out a payday loan, but I would advise people to go in with your eyes open and only if you think cheaper options are not available to you.’
Nonetheless, for some women, a visit to the pawnbroker has proved not only useful but strangely liberating. ‘There’s certainly no shame in it,’ says Tiffany Jackson. ‘It’s not our fault we ended up in the situation we did, but this way I feel I am taking control my own way.’
Jane Wall-Budden, a 29-year-old mother of two from Byfleet, Surrey, recently pawned two watches, a Cartier and a Rolex, and used the £3,000 she got for them to inject cash into her own growing business, Bumpsters, which markets custom-made cot bumpers. ‘I needed a cash injection to invest in a new product, which I felt would market well with my own invention. It made good business sense, but the bank just saw me as a little cottage industry and weren’t interested.’ The watches were languishing in her bedside table drawer. ‘Frankly, it was the only way I could get my hands on a lump sum. I would say to anyone who was in the same position and had something lying around that wasn’t of huge personal value to do the same.’
‘Money has been tight since I got divorced,’ says Lorraine Giacomelli, a mother of two from Richmond, Southwest London, ‘and when my bathroom flooded earlier this year I didn’t have the funds to fix it. I wasn’t covered by my insurance, and while I could have got a loan or used a credit card I didn’t want to be in debt — which is why I didn’t ask my ex-husband either.
‘He had been very generous while we were married and a friend pointed out that I probably had thousands of pounds’-worth of goods tucked away that I could pawn. So I rooted through my wardrobe and found a pair of £1,000 Christian Louboutin shoes, a £2,000 Chanel handbag and a Hermès bag that had originally cost £17,000.
‘At the pawnbrokers I was offered £4,000 for the lot, at a monthly interest of five per cent. I knew that designer bags go in and out of fashion so I didn’t expect an enormous amount for the Hermès relative to what it had originally cost. The important thing was that it was enough to fix my bathroom. Although I am a stay-at-home mum, with careful budgeting I’m confident I can raise the money to get them back — and if I don’t and I lose the bags and shoes, I won’t be totally heartbroken. That’s why it’s a win-win situation — I got the money I needed and I’m not left in debt in real terms. I felt quite proud that I didn’t have to ask anyone for money. I’d do it again in a heartbeat if I had to.’
Friday, November 2nd, 2012
From Futurity Dot Org
For 8 million US households, pawn shops pay
Posted By Jim Patterson-Vanderbilt On November 1, 2012
VANDERBILT (US) — The pawn shop—once a somewhat shady last resort to hawk jewelry for quick cash—has evolved into a viable alternative for families with bad credit under economic stress.
“Pawn shops are seen as more legitimate now,” says Paige Marta Skiba, associate professor of law at Vanderbilt University Law School and co-author of a new paper in progress with Marieke Bos of Stockholm University and Susan Carter of the United States Military Academy.
Pawn shops, Skiba says, are “essentially … the more efficient Craig’s List.”
Perhaps pulled more into mainstream consciousness by television shows such as “Hard Core Pawn” and “Pawn Stars,” pawn shops have several advantages over the payday loan operations that have become the most visible source of loans for those with poor credit ratings.
“Pawn credit … has the unique—and, to many borrowers, desirable—quality of having no direct impact on one’s credit score and, therefore, no impact on one’s future access to credit,” write Skiba and her co-authors.
That’s because the cash is secured by collateral of an item, often gold, that is surrendered to the pawnbroker if the loan is not repaid. The customer’s credit rating is never at risk.
Skiba’s research also found that the typical pawn shop customer was more likely when compared to the general population to be female; to be experiencing significant instability in both job and marital status; less likely to own a home; more likely to have significant child-rearing costs; and more likely to have bad credit scores and to have maxed out lines of credit.
“My research shows that 7 percent of US households have used pawn shops, so that’s about 8 million households,” Skiba says.
Use of pawn shops has been growing about 3 to 4 percent a year for the past two decades, with an explosion in growth of more than 20 percent starting in 2007, which is probably related to surging gold prices, the most commonly used collateral for pawn shop loans.
Pawn shop customers do pay high interest rates, about 15 percent. But unlike many payday loan customers, the majority of pawn shop customers repay their loans promptly. Payday loans can have annualized interest rates of more than 500 percent.
“About 85 percent of pawn shop borrowers return to repay their loans, although we do have anecdotal evidence that this number has deteriorated in the last few years,” Skiba says.
“I think sentimentality and affection for objects plays a big role here,” Skiba says. “My research has found that people are more likely to make good on their pawn contract when they’ve pawned something sentimental, like a wedding ring or class ring. So that can actually help borrowers from getting trapped into making a series of interest payments for weeks or months on end.”
Source: Vanderbilt University
Tuesday, October 2nd, 2012
From Fox Business Dot Com
Published October 01, 2012
By Vanessa Richardson
The electric bill is due in a few days, but your remaining funds are set aside for the weekly groceries. What do you do? If you have a gold ring or an iPad that you can live without for a few weeks, it could be your financial savior.
With banks drastically reducing lending, more people are turning to pawnshops when they need quick cash. Once known as dark, dingy and sometimes dangerous, pawn stores are becoming more financially acceptable and even the fodder for reality TV hits such as the History channel’s “Pawn Stars.”
Pawnshops have typically specialized in small loans of less than $100. But now they’re giving out larger loans and receiving higher-end items, such as iPads and even cars, as collateral.
Kathy Pierce, co-owner of Monster Pawn in Bloomington, Ill., is definitely seeing a higher-end demographic.
“People in business suits have been coming in for the past three years,” she says. “They’re underemployed, and they need safety-net loans to get through the week or month.”
If you’re ashamed to be seen walking into one, there are online pawnshops, such as Pawngo and PawnUp, where you receive price quotes via email, send your collateral by snail mail, and get your loan direct deposited to your bank account.
Finding the Right Shop
“You shouldn’t be afraid of pawnshops, but to be safe, opt for one that’s well-lit and clean,” Pierce says. To find a reputable store in your area, check the National Pawnbrokers Association’s database, PawnFyNdR.com.
Some pawnshops specialize in certain items. If you have an antique, look for a pawnshop with experience buying and selling antique items.
Or you can conduct the transaction online. Pawngo lets you pawn luxury items, from $250 to $100,000. Send a description and photo of your diamond ring, and Pawngo will make an offer. Ship it free of charge. If you agree on a final price, Pawngo deposits cash into your bank account. If not, Pawngo ships it back to you.
Loan terms vary by state. Pawnshops generally charge between 20% and 25%, says Emmett Murphy, spokesman for the National Pawnbrokers Association. California and New York permit a maximum interest rate of 4% per month, or 48% annually, while other states allow up to 10% per month, meaning annual interest rates of 120%. Loan periods also vary by state but are usually between one and four months.
On Pawngo, the interest rate ranges from 4% to 8%, depending on the loan’s size. CEO Todd Hills says the average loan is $2,000, which would cost $120 per month, and the average loan term is four to five months.
Say you pawn your Android phone and get $100 for it. The interest rate is set at 20%, and your loan period is two months. You owe the pawnbroker $140 at the end of the loan period. You have three choices: You can pay the $140 and get your phone back; you can pay the $40 interest, which renews your loan, and you get another two months to pay the full $140 or renew the loan again; or you can default, not pay anything at all, and your phone is pawnshop property and put up for sale.
Interest rates are hefty compared to standard bank loans, but there’s no detailed application, credit check or questions about your net worth. All you need is valid photo identification and a legally owned item of value. “There are no fees or penalties charged for late payments,” Murphy says. “You’re getting a secured loan because your pawned item is the security.”
What’s in Demand?
Jewelry is still king due to high gold and silver prices. “Customers often use the same item to borrow against for multiple occasions, so jewelry is an easy one to use,” Murphy says.
High-end electronics and digital cameras are desirable, but computers aren’t because they phase out quickly. As for brand names, Apple is best because its products retain their value.
Some items are seasonable or plentiful and fetch lower prices. “The construction crash means I have plenty of power tools, and I don’t need Weber grills in the winter,” Pierce says.
Pawngo specializes in high-end luxury items from gold and diamonds to Louis Vuitton bags and Apple-labeled anything. “We prefer small items that can be easily shipped overnight,” says Hills.
Can You Negotiate?
You probably can negotiate the price of a top-end flat-screen TV or cutting-edge electronics, but just because you think your vintage vinyl collection is worth at least $100 doesn’t mean a pawnbroker will.
“I know I can sell that DVD player for $25, so I’ll loan $15 for it. Pawnbrokers also research the prices offered on eBay and Amazon, so we know what the rest of the country is willing to pay for that item,” Pierce says.
The loan amount can be used as leverage in negotiations, she says. You may have some leeway with a $1,000 loan, “but don’t bother negotiating on a $20 loan,” Pierce says.
If you want to assert the worth of a valuable antique or piece of jewelry, bring a professional appraisal. Bringing items in their original packaging is always helpful and shows things in their best light, Hills says.
If you’re buying at a pawnshop, you’ll most likely get goods at a discount. Pawnbrokers rarely offer things at full price due to age and wear and tear. Still, do your research and know the value of an item in its current condition. Try to find out how long it’s been in the store. The longer it’s been sitting there, the more willing the broker will be to negotiate. Offering to pay cash may also reduce the price.
Overall, pawning is a money-losing proposition. But if the bank won’t lend and you think you can repay a short-term loan in two months, a pawnshop might be your short-term answer to money woes.
Just don’t do it on a regular basis. “If there’s no light at the end of tunnel in six months, it’s not a loan option for you. Just sell the asset, take the cash and move on,” says Hills.
Friday, September 28th, 2012
From PR Web Dot Com
Money Mizer Pawn & Jewelry Expands Across Country
Columbus, GA (PRWEB) September 28, 2012
With one in four American households considered unbanked or underbanked, pawn shops have become a primary source for financial services. Money Mizer Pawn & Jewelry, an emerging chain of franchised pawn stores headquartered in Columbus, Ga., continues to expand across the country and serve this growing market.
This summer, Money Mizer debuted in Florida for the first time, opening locations in Jacksonville and Panama City, and opened a fourth Georgia location in Macon. The company expects to open a total of 25 locations in Florida over the next three years, with 150 stores open nationwide by the end of 2015.
“With so many Americans in need of basic financial services, pawn shops have become a reliable source for small loans and cashed checks,” said Robbie Whitten, president and CEO of Money Mizer. “Banks don’t service this sector of the population, it’s not worth their time, and we’re happy to offer some support and help meet the needs of people in the community.”
Whitten founded Money Mizer in 1980 with his father Robert Whitten. The company has since expanded to seven locations in three states and has experienced tremendous growth, loaning customers more than $26.4 million to date. In 2009, Money Mizer launched a franchise program and expects to continue adding more locations, primarily in cities with populations of at least 50,000, including college towns and military bases.
At Money Mizer, pawnbrokers lend money on items of value ranging from gold and jewelry to electronics, musical instruments and almost anything imaginable. Loans are based on the value of the collateral. When a customer pays back the loan, their merchandise is returned or they may choose to surrender the collateral as payment in full.
“Many people who depend on pawnbrokers today are working families who use pawn loans to simply keep the electricity on, the rent paid and their gas tanks filled,” Whitten said.
The average median household income of people who pawn at Money Mizer ranges between $40,000 and $60,000 and is continuing to increase due to a number of factors related to the economy, including job losses, foreclosures and cost of living increases.
Technology has also played a large part in the growth of the pawn industry and will continue to do so in the future. As more untraditional customers tap pawn shops for loans, many are concerned about privacy. In March, Money Mizer launched PawnConfidential.com, an online resource that allows customers the opportunity to obtain a cash loan quickly and securely with complete discretion and without visiting a pawn shop.
“Although companies such as Money Mizer have helped to change the sometimes-negative connotation associated with pawn shops, technology helps cater to the non-traditional customers that rely on pawn services but are uncomfortable going into a shop,” Whitten said.
The new site provides short-term loans in exchange for collateral in the form of high-value items like jewelry, watches, precious metals, coin collections, cameras, fine art, antiques and collectibles. Valuables held as collateral during the loan repayment period are bar-coded and kept in a secured vault until the loan has been paid back. When the borrowed amount is paid in full, the items are promptly returned to the customer. Depending on the retail value of the item, loans range between $50 to $100,000 and no credit reporting or checking takes place.
For more information, please visit http://www.moneymizerfranchises.com.
Tuesday, September 25th, 2012
From Asia One Dot Com
They help customers out of tight spots
Pawnshop businesses thrive as stigma associated with pawning items lessens. -TNP
Benita Aw Yeong
Tue, Sep 25, 2012
The New Paper
Mr Joshua Lam, an accounting graduate who together with his family members, runs Wing Teck Pawnshop located in Serangoon North.
SINGAPORE – Whenever he is asked about his occupation, his answer momentarily stuns people.
“I’m a pawn star,” declares Mr Joshua Lam.
They soon realise they were thinking of a different word when he explains: “My family runs a pawnbroking business.”
This 30-year-old accounting graduate is learning the ropes of pawn valuation from his father and uncles, who helm Wing Teck Pawnshop located in Serangoon North. The business was started by his grandfather 80 years ago.
Mr Lam joined 21/2 years ago after working several years for a multinational company.
“After a few years of working outside, I thought to myself: Why make money for others when I can make my own?” he says.
Figures from the Registry of Pawnbrokers show that the industry is doing well.
In 2008, there were 114 pawnbroking outlets here. As of last month, the number hit 185.
The amount of loans given out in 2011 was almost S$5 billion compared to almost S$2.8 billion in 2010.
But Mr Lam, the youngest of three children, says the work is not easy.
He clocks in nine hours a day, six days a week, and makes a modest S$3,000 a month.
But he enjoys honing his communication and bargaining skills, as well as learning what it takes to run a business.
“When I first started, I used to be a little sarcastic when I had to deal with rude or unreasonable customers.
“I have learnt to be patient and polite in all situations,” he says.
Mr Lam, who is fluent in the Hakka dialect, says his limited ability to speak other languages and dialects is a challenge.
“An Indian customer tried to teach me a couple of Tamil phrases, but when I repeated it to another customer, she couldn’t understand me at all,” he says, with a laugh.
He finds meaning in helping customers through a tough spot.
“Some customers become friends and you get to hear the stories of their lives. A few are so appreciative of how we’ve helped them out in tight financial situations that they even buy lunch for all of us,” he says.
These days, items can be pawned in exchange for cash to be used for home downpayments or for investment purposes.
Director of operations of the Valuemax chain of pawnshops Yeah Lee Ching says: “We have investment-savvy customers who pawn the gold bars they own for cash to re-invest and make more money.”
Customers of pawnshops can pay one per cent interest on the loan amount for the first month, and a rate of 1.5 per cent for subsequent months.
Business at pawnshops like 23-year-old company, Valuemax, is thriving.
Ms Yeah, who runs a total of 15 outlets here with her father and two brothers, says there are plans to add another outlet sometime next year.
She explains that traditionally, people would only patronise pawnshops when they were in dire need of cash to cover a rough period.
“For years, there has been a stigma attached to pawnshops, especially because of the way it has been portrayed in television serials.
“This is slowly changing, with greater marketing efforts,” she says.
Some pawnshop chains have even taken to employing celebrities to front their brand, hoping to give it greater legitimacy and presence in the market.
Over the years, the interior designs of many pawnshops have also received face-lifts to cater to the growing number of clients.
Traditionally, valuators stood on an elevated platform behind bars and peered down at customers as they handed their items over.
These days, valuator and customer stand on even ground and see eye-to-eye through glass windows.
Warm yellow tones also replace harsh white lights in many shops, giving the shops a more welcoming atmosphere.
There is also a new group of clientele who visit pawnshops looking for exotic designs and a good bargain.
Says Ms Yeoh: “When The Little Nyonya drama serial was all the rage, there were people who came scouting for ‘intan’ – traditional Peranakan jewellery.”
‘Convenient’, ‘little paperwork’
Whenever she is short on cash, she turns to the pawnshop for “help”.
The 56-year-old assembly worker, who wants to be known only as Madam Ho, earns around S$1,000 a month.
Her finances get tight when she decides to spend “slightly more” on shoes or skincare products, she says.
And so, for the past four years, she has been visiting the pawnshop when in need of ready cash. She pawns several pieces of white gold jewellery – which she bought 10 years ago – for S$500 to S$1,000.
In order to pay the minimum exchange rate (one per cent for the first month), Madam Ho renews her pawn tickets every month.
“It’s very convenient. There is also very little paperwork involved,” she says.
Madam Ho is not the only one who finds pawnshops convenient. Housewife Madam Laura, 60, also finds them handy.
“Sometimes I forget to bring my cash pouch for my shopping trips, so I take off one jewellery item I’m wearing, like a ring or bangle and pass (the pawnbroker) my IC.
“In exchange, I get just enough cash – S$50 or S$100 – for my groceries,” she explains.
She redeems her items and also pays the one per cent interest charge – an additional 50 cents to a dollar.
It also doubles as a safe-deposit facility, where she keeps her dowry and precious jewellery collection.
Every few months, she visits the shop to pay the loan interest and renew the pawn ticket, so that her items do not get sent for auction.
“I have about S$300,000 worth of jewellery stored with them,” she says.
The retired private tutor also enjoys browsing for “new” jewellery items at the pawnshop.
“I don’t mind that it’s second-hand at all. Some of the pieces can be very good deals. I could pay $8,000 for a brand new bangle at a boutique in Serangoon.
“I can find a similar piece which costs only S$5,000 to S$6,000 at the pawnshop,” says the self-confessed shopaholic.
Friday, September 21st, 2012
From PR Web Dot Com
Pawnbrokers Report Increase in Loans but Less Cash for Gold
National Pawnbrokers Association Announces the Results of the 2012 Trend Survey
Keller, TX (PRWEB) September 20, 2012
The National Pawnbrokers Association (NPA) today announced the results of NPA 2012 Trend Survey that assesses how the changes in the U.S. economy affected the pawn industry since the beginning of 2012. According to the survey, the average pawn loan amount increased to $150, nationally. This estimate is up from 2010, in which the average loan amount was $100. Additionally, over 80 percent of pawnbrokers report an increase in the dollar amount of loans being extended.
“Pawn store customers are from all walks of life and tend to borrow only what they need, as indicated by the average national loan amount,” said Kevin Prochaska, president of the National Pawnbrokers Association. The Trend Survey indicated that over 85 percent of all pawn loans are repaid, which is consistent with the national average in 2010. “The increase in the average pawn loan amount indicates that American families were seeking financial relief by turning to their local pawnbroker.”
Contrary to popular belief, the most common transaction pawnbrokers make, by far, is a pawn loan. While cash for gold transactions and retail sales are important to the pawn store business model, over 80 percent of pawnbrokers reported that pawn loans are the most common transactions.
What may come as a surprise, however, is that cash for gold buying has fallen off. With the downturn in gold prices, which dipped to $1550 in January after skyrocketing to over $1,900 per ounce in 2011, 70 percent of pawnbrokers are reporting a decrease in gold buying transactions. This trend is viewed as temporary, as customers are opting to borrow against their gold or hold it for a potential future spike in value.
“The pawn business model is complex,” added Kevin Prochaska. “While many stores benefited from the increased amount of pawn transactions, there were also many shops that suffered from sluggish cash for gold activities.”
The forecast for 2013 was lukewarm. Pawn store owners believe that next year will bring an increase in all business, but they are skeptical that the retail side will grow as much. “For years, pawn shops have been providing safety net loans to families that encounter sudden financial emergencies,” adds Prochaska. “These vital, small-dollar loans simply aren’t offered by banks and other traditional lending institutions. This year will be no different, but the industry will have to adjust to the new economic environment.”
For more information about the NPA 2012 Trend Survey, contact NPA External Communications Emmett Murphy at: media(at)nationalpawnbrokers(dot)org or call 212-365-0691 x5.
The National Pawnbrokers Association is a trade organization for responsible pawnbrokers. The NPA works to provide pawnbrokers nationwide with resources and tools to strengthen the pawn industry. NPA members are committed to operating their business in such a manner as to enhance and promote the positive and professional image of all pawnbrokers. Members believe in establishing positive and long-lasting relationships with local, state and federal government officials. The NPA is the industry’s only national association and is located in Keller, TX.
Friday, September 7th, 2012
From Boston Globe Dot Com
By Bella English
Goldstein, president and CEO of Empire Loan, is a third-generation pawnbroker who just opened his seventh store, in Lowell. The others are in Boston, Worcester, Stoughton, New Bedford, and two in Providence. The weak economy has hurt many businesses, but has helped the pawn business because people need loans quickly, with no credit checks. Goldstein just got a permit to open an eighth shop in Lynn.
‘My grandfather was a pawnbroker in the Bronx, and he passed that store on to my father, so I’ve been doing this ever since I was a kid.’
Q. What exactly is a pawnshop? My only notion is from movies, when some shady-looking character pawns his grandmother’s wedding ring to pay for his booze.
A. I’ve been fighting that image my entire life. My grandfather was a pawnbroker in the Bronx, and he passed that store on to my father, so I’ve been doing this ever since I was a kid. Pawning is the original form of lending. Pawn-type loans date back to ancient China, and to the House of Medici.
Q. How does it work?
A. If people need to borrow money, they bring in something of theirs, like jewelry or a watch. Let’s say someone brings in a Rolex. I get it appraised. We usually loan at 70 percent of the value. So if the watch is worth $1,000, we’ll loan $700. If the owner says yes, we make out the terms of an agreement. He has to show a government-issued photo ID, and we take a picture of him and the item. I give him the money, and he gives me the watch. I put it in an envelope and it gets stored in a safe.
Q. So how does he get it out of hock?
A. We charge 3 percent interest on the loan, and he can come in anytime up to six months after the loan and pay us back. If he comes back in three months, he would owe us $763 and he would get his watch back.
Q. What if he doesn’t come back?
A. He’s under no obligation to pay back that loan, because I have more than $700 in my hand, with that watch. But 88 percent of people who borrow money from us pay back their loan and get their merchandise back. If they don’t come back after six months, I put it in the showcase to sell.
Q. Who are your clients?
A. Most of them are blue-collar workers. We don’t see extremely impoverished people because they don’t own things.
Q. How has the weak economy affected your business?
A. The job market is down, certainly there are more people who need money. We have seen more suburban folks come in. But the economy hasn’t affected my business as dramatically as the price of gold has. When I started my business in 1985, gold was trading for somewhere between $275 and $325 an ounce. Five years ago, it started to spike, and gold has gone up to over $1,700 per ounce.
Q. What does that mean for your business?
A. It means the gold chain my customers took off their neck to pawn in 1985, with a $50 loan, now I can loan $200 on it. It’s good for my customers, and it’s good for me.
Q. What do you think of the pawnbroking shows on television?
A. I’ve spent my life trying to legitimize my business, and then the reality shows come on. Some of them are kind of fun, and I get more calls because of them. But “Hardcore Pawn” is my worst nightmare. This guy is awful. He lies to customers. He cheats them. It drives me crazy.
Q. Tell me about a memorable customer.
A. Noel had some mental challenges, a low IQ. He was a nice man, very simple. He ended up in a shelter, where he met Marie. She was also low IQ, and she was very sweet. One day, he’s dressed a little nicer. He borrows on Marie’s bracelet and says they are going to city hall and getting married. I asked him what they were going to do after. He says, “Not much.” I told him to come back to the store. I go to the bakery up the street and say, “You’ve got to make me a wedding cake, fast.” She put together a little tiered cake and we had a cake-cutting ceremony at the store for Noel and Marie.
Q. Have you ever pawned anything?
A. No, I have never needed to. I’ve been really fortunate and I feel an obligation to make sure that we as a company give back to the community. Through our Empire Loan Charitable Foundation, we recently pledged $125,000 to the Mattapan Community Health Center for its new construction. It’s a beautiful space.
Thursday, September 6th, 2012
By Wendy Osher
Reality TV film crews will be in old Wailuku Town this week where filming begins on the proposed Pawn Stories pilot episode.
Employees of Kama’aina Loan – Cash for Gold have been encouraging patrons to bring in unique items, Maui memorabilia, and vintage finds from old Hawaii.
“It doesn’t have to be bizarre, though. Hawaiiana items are sure to be a hit with the mainlanders,” said store bloggers on the company’s website.
Filming at the Market Street location begins at 9 a.m. tomorrow, Thursday, September 6, 2012. Crews will return again at 9 a.m. on Friday; and if more footage is required, a final day of filming will commence at 10 a.m. Saturday. Filming will also take place on location during the First Friday festivities in Wailuku Town.
The show is being filmed by a crew from Illinois, which is trying to sell the series to interested television networks.
The Pawn Stories pilot is completely unscripted and features half a dozen pawn shops from across the nation.
Pawn Stories has produced two series of television shows based on real pawnshops. Its president, Robert McCullough, a pawnbroker himself, says nothing on his shows is fake. He videotapes what happens as it happens.
Richard Dan, owner of Kama’aina Loan, the oldest, largest pawnshop and precious metals buyer on Maui, asks his customers and friends, old and new, to come by, have fun and help publicize and promote Maui and its interesting people.
“There are a lot of reference books upstairs, and with a combined century or so of experience, there are not that many things that have never come over the counter before,” the company’s blog stated.
So, if you’ve got something that could stump store employees, your inquiry could make the cut as as a Pawn Stories pick.
The pawnshop will be open from 9 a.m. to 6 p.m. Sept. 6 & 7, and 10 a.m. to 4 p.m. on Sept. 8.
Wednesday, August 1st, 2012
From Fox Business Dot Com
Borrowing money is always a last resort, but for anyone who’s been in a pinch between paychecks, sometimes it’s a necessary evil. But who or where you choose to borrow from can take your predicament from a temporary dollar dilemma to a long-term financial nightmare.
We consulted financial experts to help decipher which borrowing options are most likely to set you on a course toward financial disaster. Here are their borrowing breakdowns, from least risky to last resort…
1. Credit card purchase. Putting your unexpected expense directly on your credit card is a wiser option than a cash advance. And, it can actually work to your advantage if you can pay the balance when the bill arrives, says Beverly Harzog, an independent credit card expert and consumer advocate. “If you can pay it off and you have a rewards card (or cash back or airline miles), you can get rewards on that purchase as well.”
That being said, Harzog is quick to point out that any credit card purchase can be a slippery slope since you can end up carrying the debt for a long period of time if you’re not diligent about paying it off quickly.
The verdict: good borrow… if you pay off the purchase right away.
2. Pawnshop loan. Believe it or not, a pawnshop loan is one of the better options to consider, says Mary Hunt, author of “7 Money Rules for Life,” and founder of Debt-Proof Living. “A lot of people think of them as back alley, but that’s really not how they work anymore,” she says. In fact, thanks to shows like “Pawn Stars,” they’ve become more mainstream than ever.
The way it works is you bring in an item as collateral for the cash they give you. The pawnshop must keep your item for an agreed upon amount of time (for instance, 90 days). If you come back and pay back the loan before the term is up, you get your item back. If you don’t, your item is sold
The perks: “It’s clean. There are usually no credit checks. And you have the option to not pay it back legally,” says Hunt. In terms of risk, the only thing to consider is how much sentimental value the item has, just in case you’re unable to pay for its safe return.
The verdict: good borrow… if you’re not using your family heirlooms or wedding rings as collateral.
3. Borrow from a relative. If you’re lucky enough to have a well-off relative who’s happy to help you out of a jam, good for you. But even so, when asking for a loan, sit down together and put the terms in writing, says Hunt. “Have a plan in mind before you plan to borrow and offer some collateral for that loan. It will put you in a much better light if you say, ‘I want you to hold my iPhone until I pay you back,’” she says.
Other terms you need to agree upon include the payment schedule, how much interest you’ll pay (Hunt says 5% is a fair amount) and what happens if you miss payments.
There are even online services like LoanBack.com and LawDepot.com that allow you to customize a family loan contract for a small fee. The extra effort may help avoid a family feud over a few hundred bucks.
The verdict: good borrow… if you treat your family loan like a business transaction.
4. Peer-to-peer lending. Fairly new to the lending arena is peer-to-peer lending. Sort of like the eBay of small loans, a group of lenders pool available funds and then decide which borrowers they’d like to work with. The SEC is involved, so it’s regulated, but it can be a less strenuous qualifying process than a traditional bank loan.
“Lending clubs turn down a high majority of borrowers, so it’s not a slam dunk. If you have excellent credit and aren’t in debt up to your eyeballs, though, you can get a good interest rate,” says Harzog.
The verdict: good borrow… if you have good credit and some time to spare until you qualify.
5. Credit card cash advance. Most credit card companies offer customers the option to get cash via an ATM or bank withdrawal (sometimes it comes in the form of a check), but that convenience comes with a price. “First of all, you’ll be charged an initial fee of 3% to 5%,” explains Hunt. “And that cash amount immediately starts incurring interest.” In other words, you don’t have any grace period at all. Perhaps the worst part, however, is that a cash advance is subject to a much higher interest rate than you’d have on a regular credit card purchase. “It can be 10% to 15% higher,” says Hunt.
The verdict: bad borrow
6. Bank advance direct deposit loan. An advance on your direct-deposited salary is basically a bank-sanctioned payday loan. You may feel like it’s a legitimate option because your bank is offering cash upfront for the promise of repayment when you receive your paycheck, but the problem is the temporary patch can potentially lead to bigger debts down the line, says Mitchell D. Weiss, a professor of finance at the University of Hartford and author of, “Life Happens: A Practical Guide to Personal Finance from College to Career.” “You intend for it to be a one shot deal, but people who can least afford it get caught in this debt trap,” says Weiss.
“You’re sacrificing the future stream of payments for cash upfront today,” explains Weiss. The problem is you won’t get all of next week’s paycheck, and then what do you do for an encore if you come up short again?
The verdict: bad borrow
7. Payday loan. Similar to a bank direct deposit advance, the way a payday loan usually works is you write a postdated check for the amount you are borrowing with a fee and interest tacked on, and the establishment gives you the cash on the spot. Another alternative is to allow the payday lender to electronically transfer the amount from your bank account to theirs come payday. In other words, you’re granting them access to your bank account, which is always a shady prospect.
“It is like the ultimate snowball that turns into a huge avalanche. Borrow $100 to start, and it will turn into thousands,” Hunt says. The reason? “They make it sound so easy.” Payday loan providers are often reassuring, says Hunt, telling you not to worry if you need to roll your loan over for another pay period or until you’re back on your feet. Of course, that means the fees will keep adding on, too. “They take full advantage of people who don’t understand the system,” she says.
The verdict: bad borrow
The key to wise borrowing — no matter which route you take — is to first try to avoid it and if you can’t, have a well-thought out plan in place for paying back what you owe. Try going with the option that will cost you the least in the long run, and when it’s behind you, start socking away some money toward an emergency fund so you won’t have to go borrow in the future.
Thursday, June 28th, 2012
From Tulsa People Dot Com
Tight economic times, as well as two popular reality TV shows, have spurred renewed interest in a longtime buying- and-selling industry: pawnshops.
By Matt Gleason
A few days before Christmas, Jennifer Langham peered into the jewelry case at Golden Pawn II, a sprawling 14,000-square-foot pawnshop just north of Cherry Street. Closing time was approaching on this Tuesday evening, but the recently engaged 23-year-old was set on buying her fiancé, Michael Hood, his own engagement ring.
“I thought it was a neat idea to get him a ring, (too),” she says.
At the same time, Hood was prowling the store for a prize not measured in karats but in gauges — 12 of them.
Of course, a shotgun isn’t forever, like the diamonds on Langham’s impressive engagement ring, which the couple also purchased at a pawnshop.
The future Mr. and Mrs. Hood could have purchased Langham’s engagement ring at a high-end jewelry store, but the allure of a bargain was difficult to resist.
For dedicated pawnshoppers, these are department stores unlike any other.
Where else can patrons shop for jewelry just a few steps away from an arsenal of weapons and a classic arcade-style “Centipede” machine? Or perhaps tools, golf clubs, guitars or fine art?
“I actually got it 50-percent off,” Langham says proudly of her ring, which she estimates would have cost 10 times more at a traditional jewelry store. “I do kind of have expensive taste, but it’s just as nice as any ring that would come from anywhere else.”
A cyclical industry
Finding incredible pawnshop deals like Langham’s could be attributed to the current economic crisis. Since 2007, 30 million Americans annually pawn everything from electronics to jewelry to secure short-term loans that do not affect their credit history, according to the National Pawnbrokers Association (NPA).
Most are average-income adults working in regular jobs who need the extra cash to cover basics such as the electric bill, the rent or a tank of gas, according to the NPA. The organization notes that the average pawn loan in 2010 was $100, up from $80 in 2008.
According to a report from the Oklahoma Department of Consumer Credit, 32 pawn brokers were operating in Tulsa as of November 2011, with a total of 319 active, licensed pawn brokers operating in Oklahoma.
In Tulsa, Kelly Knowlton is a local authority on pawnshops. He owns Golden Pawn II and two Tulsa County Pawn locations. The 61-year-old also serves as president of the Oklahoma Pawnbrokers Association.
Since the economic downturn began more than four years ago, Knowlton estimates that Golden Pawn II has had a 10 percent to 20 percent increase in business, with more people pawning items. Knowlton looks for the three Gs when buying merchandise — guitars, guns and gold.
Over at Second Hand Rose Pawn Shop, located on East Third Street, John Brazil has also witnessed the pawn business change.
Brazil, who has worked at the store for 35 years, says, “Unlike what people think, our business tracks right along with the economy. When the economy is down, sales are down and loans are up.”
Ray Rose is another fixture of the local pawn business. He is a member of the Rose family, which has owned several local pawnshops since Rose Co. Pawn Shop opened in 1912, and Rose Co. Pawn Shop remains in downtown Tulsa at 316 E. Second St., with Rose behind the counter.
“We’re kind of cyclical,” Rose says of the pawn industry, “so sometimes we do better in hard times; it just depends.”
Additionally, pawnshops are attracting more first-time middle-class customers, pawnbrokers say.
In late December, Anthony Littlejohn, a 28-year-old Army veteran who served in Iraq, had just taken a job delivering for Pizza Hut in his Jeep Compass.
Trouble was, he soon needed to replace a tire, but he was low on cash and several days away from a paycheck.
With no other option to cover the unexpected tire expense, Littlejohn pawned his 40-inch television and his desktop computer for a $250 loan from Golden Pawn II. Soon he was back to work and no longer driving on a spare tire.
“Middle-class America is pawning more because of the economy,” says Knowlton, of Golden Pawn II. “I think if they get a speeding ticket, or anything unexpected, they come here and pawn a guitar, or whatever, to get enough money to get them by.”
Tony Mills, founder of Big Time Pawn on East 11th Street, says, “You see a new mix of a lot of people who have never been in a pawnshop in their life, but they come through now (to sell items) because they hit on hard times.”
Small-business owners, especially those in the construction business, are a part of the growing customer base, Knowlton says.
“They come to pawn whatever they can to make payroll for next Friday,” he says. “They’ll come in and pawn a truck, or some of the tools they don’t need, and get a $1,000 or $1,500 loan.”
Dee Ann McHenry, owner of Big Time Pawn, has noticed an increase in older customers who pawn.
“The retirees are just not able to make it on their retirement income,” she says. “Twelve years ago, we hardly had any elderly people come in.”
Mills recalls a woman in her 60s who had a valuable ring she often pawned, but every time her children came to town for a visit, she hurried to get it out of pawn.
“Then I guess she ran into some bad luck,” Mills says. “We didn’t hear from her for over a year, but we still kept her ring in the back.
“Finally, she called us and wanted to know if the ring was for sale. She started crying when we told her she could have the ring back for what she owed us. She was so thankful. It was pretty rewarding.”