Consumer Tips: How do Pawn Shops Work?

imgJan 26, 2017

Pawn shops make small dollar loans on valuable items. Unlike bank loans, pawn shops will lend to anyone as long as they have the right collateral.

Good credit is not necessary. Furthermore, if you have good credit but don’t want to hassle with a bank because you only need a small amount of money, taking out a pawn loan will never affect your good credit. If you need a small loan to make it until your next paycheck and you are considering a pawn loan there are a few things you should know to make the process easier.

Pawn lending is a highly regulated industry so while you won’t have to worry about credit checks; you will be required to show identification and fill out some paperwork in order to take out a pawn loan. There are rules and regulations pawnbrokers must follow in regards to the interest they are allowed to charge you as well.

Going to a reputable pawn shop that is a member of the National Pawnbrokers Association can ensure that your experience taking out a pawn loan is both professional and pleasant.

The right kind of collateral is also important. Pawn loans on gold are very popular. Diamond jewelry and Rolex watches are other items that receive top dollar at a pawn shop.

If you are going to pawn electronics, make sure they are in good working order and an up-to-date model or the pawnbroker is not likely to lend on it. Other items you may be able to take a pawn loan out on are musical instruments, bicycles and tools.

Once you have agreed upon the loan amount the pawnbroker will send you home that day with cash. You will also have the terms of the loan which will explain when your loan is due and the interest you will be charged. If you are unable to repay your loan in time the pawnbroker may extend the lending period. Once you have repaid your loan your collateral will be returned to you. If you choose not repay the loan the pawnbroker will then sell the item you pawned in the pawnshop.

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I purchased a guitar amplifier from Best Collateral. I walked out of the store with an amp in perfect condition for nearly half the price listed online and a new found respect for my local pawn shop!

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