Below are a few FAQ's concerning pawn shops -
As humanity's oldest financial institution, pawnbroking carries on a tradition with a rich history. Pawnbroking can be traced back at least 3,000 years to ancient China and in the earliest written accounts of Greek and Roman civilizations. During the Middle Ages, specific usury laws imposed by the Church prohibited the charging of interest on loans, thus limiting pawnbroking to people who had religious beliefs outside of the Church. Out of economic necessity, and because of problems in the banking system, pawnshops made a resurgence in later years.
The House of The Lombards operated pawnshops throughout Europe. They even counted royalty, such as King Edward III of England, among their clientele during the 14th century. The symbol of the Lombards' operations were the three gold balls that remain the trademark of pawnshops. Pawnbrokers, also known as collateral loan brokers, make loans based purely on the intrinsic value of the collateral. Checking the customer's credit history is not necessary because the value of the item to be pawned is based on the article pledged, not the person. If the loan, or at least the interest, is not paid off during the specified term (usually one or two months), the item is forfeited and may be sold by the broker.
A typical transaction begins with a potential borrower coming into a pawnshop with the item he or she wants to pledge. The pawnbroker then determines how much to loan the patron for the item. Loans are paid out at a rate of about one-third to one-half of the price the broker can expect to receive for the sale of a good during the worst of times, assures that a profit will be made.
Pawning has long been a source of capital for people in times of need, as well as a means of financing business ventures. It is interesting to note that when Christopher Columbus approached pawnbrokers. Today, statutory regulations of banking and finance are based on the legal foundation established by pawnbrokers. Many of the first leaders in the banking industry had roots in pawnbroking. As was the case 3,000 years ago, pawnshops continue to be a source of available credit for individuals in need of a short-term loan.
Why would someone go to a pawn shop to get a loan?
Pawnshops offer the consumer a quick, convenient and confidential way to borrow money. A short-term cash need can be met with no credit check or legal consequences if the loan has defaulted. A customer receives a percentage of the value the broker believes the collateral would bring in a sale. Although the loan to collateral ratio varies over time and across pawnshops, a loan value of about 50 percent of the resale value of the collateral is typical. When a customer pawns an item, terms of the loan will print on a pawn ticket for the customer. The Pawn ticket states the customer's name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and the amount that must be paid to redeem the pawned item.
What is the foreclosure procedure?
If a customer defaults, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time, generally one to two months.
Do most pawning customers lose their merchandise?
On average, 80 percent of all loans get redeemed. Repeat customers make up most of our business, similar to any other lending or retail establishment. Pawnbrokers know the vast majority of their customers because they often borrow against the same items over and over again. Pawnbrokers offer non-recourse loans, looking only to the item being pledged to recover their investment if the borrower chooses not to repay the loan. It is solely the choice of the customer whether he/she elects to repay the loan.
How can I be sure the merchandise I purchase at a pawn shop isn't stolen?
Less than one half of one percent of all loans made, come up as stolen goods. Thieves and robbers are a pawnbroker's worst enemy. Pawnbrokers work closely with local law enforcement to catch and prosecute these perpetrators. A customer must provide identification to show evidence of the transaction. This information is then presented to the police department, therefore decreasing the likelihood that a thief would bring stolen merchandise to a pawnshop. Pawnbrokers are trained to look for signs of stolen property to avoid these costly mistakes. It is not in the interests of the pawnbroker to accept potentially stolen merchandise because the police can seize the merchandise and the pawnshop owner loses the collateral and the loaned money.
What is the difference between buying at a pawnshop and buying at a retail store?
Mainly price. Pawnshops can offer you merchandise ranging from 1/2 or 1/5 off retail prices.
Why is the image of pawnbroking changing since the 1930s?
Today's pawnbroker is upgrading everything from the interior and exterior of his or her shop location, employee presentation, customer service, signage, marketing and the merchandising approach. Pawnbrokers focus on providing exceptional customer service and are very active in the community, both politically, and in local charities. Pawnshops today range from a single or multi-store operation to publicly held company chains. The atmosphere at a pawnshop is nothing like what you saw in Rod Steiger's depiction in The Pawnbroker -- visit us to see for yourself.
Are pawnshops a “bad times” industry?
Pawnshops survive bad times if they make adjustments both at the retail and loan counters, but they do far better in good times. In hard times, customers move away to finds employment, have less ability to repay their loans, and the value of all merchandise goes down. Merchandise values go down because the major-brand retail discounters sell for less to maintain or broaden market share. If they retail for less, pawnbrokers must loan less thus earning a smaller return. Regardless of income level, most people periodically borrow money. When the economy is doing well, customers are more able to repay their loans. Forfeited merchandise sells at a higher rate because customers have a more discretionary income.
Do pawn shops attract indigents and derelicts?
Definitely not. Indigents and derelicts typically have no assets to use as collateral. No one builds a business around these people. The typical pawnshop loan customer is employed, living within one mile of the store, and occasionally needs short-term cash for a bill such as a medical expense or car repair, or to buy food. The typical retail customer is a bargain hunter, either by need or desire and comes from all walks of life. Most pawnshop customers are repeat customers.
Do pawn shops down-grade the neighbourhood and hurt property value?
Neighbourhood property values are based in part, on the appearance and care given to the properties. There is no factual basis to support a claim that an eye-pleasing pawnshop negatively impacts values. On the contrary, if they attract customers, they enhance the opportunities for other merchants and the community.
Are pawnshop rates excessive?
To provide the service, all lenders must charge rates commensurate with risk, size and duration of the loan, collateral offered, and recourse. Pawnshop loans are small-dollar, high risk, short duration loans. The item stands as the sole collateral offering no other recourse. And pawnbrokers are liable for replacement value if something happens to the item in their care. There are no hidden charges as with other lending institutions. On the other hand, the Pawnbrokers cost basis is far more significant. They incur a cost for security, handling, storage, and regulation not incurred by others. Due to the 15-20% of pawn shop customers that elect not to repay their loans, pawnbrokers are forced to turn their "bad debt" into a retail center to recover their cost. Other lending institutions do not incur a retail cost including additional floor space, gondolas, counters, personnel, advertising, shoplifters, competitive retail cost, and new merchandise cost to supplement the forfeited goods.
Should photographing or fingerprinting pawnshop customers be required?
Pawnshop customers already provide full identification with each transaction, a copy of which goes to local law enforcement. Additionally, most pawnshops maintain surveillance cameras in their stores, the same system used by banks. To require anything more than needed by banks implies there is a relationship between how much money one has and their integrity. You have questioned the quality of their character based on financial status - a form of discrimination.
Should there be zoning restrictions other than general retail?
Pawnshops are neighbourhood businesses providing vital services to the community. To restrict zoning to other than general retail should require a very compelling reason. The compelling reason should not be historical perception. To restrict zoning there should be something wrong with the service provided, the business itself, or the customer served.
Something you should know.
How can I be sure the merchandise I purchase at a pawn shop is not a stolen item?
Less than one-fifth of one percent of all collateral is even suspect as having been misappropriated in any manner. Thieves and robbers are a pawnbroker's worst enemy. Pawnbrokers work closely with local law enforcement to catch and prosecute these perpetrators. A customer must provide identification to show evidence of the transaction. This information is then presented to the police department on a daily basis, therefore decreasing the likelihood that a thief would bring stolen merchandise to a pawnshop.
Pawnbrokers are trained to look for signs of stolen property to avoid these costly mistakes. It is not in the interests of the pawnbroker to accept potentially stolen items because the police can seize the merchandise and the pawnshop owner loses the collateral and the loaned money. It's not just about the money. It's following the accepted principles of right and wrong that govern the conduct of this profession.