November 2008 - Working with a Pawn Shop

In a time when folks are counting every penny, perhaps it’s time to overview a service that provides quick cash - and doesn’t necessarily cost that much in return. A pawn shop is a great place to save money and find some great bargains, but not many people are fully detailed on how to use a pawn shop to get quick cash.

Pawnbroking has been in existence since the 13th Century when Francescan monks started it to help the poor. In England, in 1338, Edward III pawned his jewels to the Lombards to raise money for his war with France. King Henry V did much the same in 1415. Queen Isabella was known to have pawned her jewels so Christopher Columbus had the funds to go in search of the Americas.

Pawn shops are valid options for short-term loans when you are short on cash -- perfect for when you are in a "pinch," but not the best option for long-term financing. Still, if you are living paycheck to paycheck and come up a few days short, a pawn shop loan can get you through to the next pay day. If you are short on the mortgage, perhaps you might pawn a ring in order to keep your house.

Most pawn shops accept jewelry, electronics, computers, and some accept guns. Rarely will you find a pawnbroker who will turn down gold. Some shops may specialize in one item - guns perhaps, or jewelry only, but most in our region accept general merchandise.

Pawn shops are beholden to state laws and restrictions, but some practices between shops may vary. No matter what you pawn or where though, you will be required to be 18 years of age, have a picture identification (Driver’s License), and you must sign a contract noting that the item being pawned is your own property.

But to begin, verify the shop’s license. State law requires a pawn shop’s license be posted in plain view. Then, ask about the shop’s policies because different shops have different policies.

Ask about the maturity dates (when your loan is due), default dates (when a shop can sell your pawned item), and the cost of fees. Many loans are for 30 days, and include a monthly fee. Default dates come into play usually 60 days after non-payment.

Expect fees, don’t be surprised by them. A pawn shop can charge handling fees, appraisal fees, storage fees, insurance fees.

Each pawn shop can also set its own interest rate as long as it does not violate any state laws. Interest is applied to the loan, as well as to the fees associated with the transaction.

Before you pawn an item, you may want to research policies, fees, services and interest rates at different pawn shops first.

In most pawn shops, you can simply sell your item, and walk out with the cash. Or, you can agree in writing to leave your item in exchange for a loan, and can get it back when you pay off the loan and fees.

Don’t expect top dollar for your item. The owner wants to make sure he or she can get the money back if/when the shop has to resell it. Still, feel free to negotiate. If you are not comfortable with the value or price offered by the broker, you are not obligated to complete the transaction.

If you do proceed, however, law requires pawn transactions to include finance charges, amount financed, the annual percentage rate of the finance charges, maturity and default dates - and a detailed description of the pawned item. If you pawn an electronic item, the paperwork should include the model and serial number. Pawned jewelry descriptions should include the weight, color, number of gems and perhaps even a sketch or photo.

If you decide to pawn your item, and complete the forms, you will be given a pawn shop ticket stating the terms of the loan, your name and address, description of the item, amount lent, maturity date, interest rate and the amount you must pay to redeem your pawned item.

Basically, if you take a loan, you have offered your item as collateral on that loan. If you do not pay back your loan by the specified maturity date, the pawnbroker can then, following the default date, sell your item to someone else.

If you fail to repay the amount on your pawn ticket by the stated date, your pawned item becomes property of the pawnbroker, who can, in turn, sell it. If you want it back after that date, you will have to first pay your loan and fees, and then buy the item at the broker’s set price.