What Consumers Should Know About Pawnshops
When many think of a pawnshop, it’s not the prettiest picture. Most often, consumers are under the impression that a pawn shop is the last stop for someone on rough times and are run by hardened individuals looking to take advantage of those people. However, most pawnshops are reputable places that make a profit off a loan system using valuables from the consumer.
In fact, these establishments are regulated by 14 different federal statutes and regulations. Additionally, they are subject to even more state and local laws. This makes pawnshops one of the most regulated business types around. If there is a pawnshop you are unsure of, you can check their standing with your local Better Business Bureau or search on the NPA’s website for reputable pawn shops in your area.
How the Loan Works
A transaction with a pawnshop should be a relatively straightforward process. At the beginning, it starts as a collateral-based loan offer. This sounds more complicated than it truly is. The loan is simply secured by something of value, such as a piece of jewelry or musical instrument.
Based on that, the broker decides if they are interested and will make an offer. The broker then agrees to keep the item until the loan is paid back. The loan amount tends to be a portion of what the item is worth as a sign you will actually pay the loan back. You can also choose to sell the item outright, but pawnshops tend to be less interested in these transactions. This is simply because the loan process creates more profits from the interest and charges.
In every transaction, the broker is required to give you a pawn ticket. It is imperative you keep this ticket. It is more than just a receipt. It also has information regarding fees, the expiration date, which item you have pawned, and so forth.
Repayment of the Loan
There are two ways to pay back the loan. The first, and more preferable, repayment is to return and pay back the total balance including the loan amount and all added fees before the deadline. The second way is to leave the item. While this isn’t a way to repay the loan or get the item back, it has no bearing on your credit report and there will be no collection action. On average, 80% of people do repay their loans at pawnshops but there are no consequences for leaving the item other than being unable to recover it. If you have questions about the pawn process, contact us today.