There are a lot of people who are interested in pawn shop loans and pawnbrokers, as well as how they can be used for things like lending. There’s also a lot of misinformation out there and people who are trying to sway your opinion for their own benefit—so who are you to believe? In this guide, we cover everything that you need to know about pawnbrokers, including what they are and what they do, as well as whether they’re the right choice for your needs.
Pawnbrokers could be a useful solution for the lending that you need. They could also be a source of stress and uncertainty if you’re not prepared or you don’t know what you are getting into. Fortunately, most pawnbrokers have a similar setup, and getting to know one helps you basically understand them all. Keep reading to learn everything that you need to know about pawn shop loans, including how they work, what you can and can’t pawn, and how lending solutions could help people who have few other options to get extra cash when they need it.
Pawn Broker Definition
A pawnbroker is someone who specializes in procuring and trading items of value, perceived or actual, based on their importance and other factors. Pawnbrokers often deal in:
- Historical documents
- And other valuable collectibles
They also frequently have musical instruments, as these items are great for resale and offer a lot of value to people selling them.
By definition, a pawnbroker is someone who brokers a transaction where you “pawn” an item, or have it placed on hold at the shop in exchange for a loan for a certain amount of money, which is usually based on the value of the object in question. When the loan is repaid, the item is returned. If the borrower fails to repay their loan in time, the item can be sold by the pawnbroker to recoup their losses.
This often works in their favor because they can sell the item for a higher value than what they are getting in your repayment costs.
Do Pawn Brokers Lend Cash?
Pawnshops and pawnbrokers do pay cash for some items, or “lend” cash in the pawning process. However, it’s not like a bank where you can just walk in with any need and get a loan. You have to have an item of value and it has to be of value to the pawnshop. Take a diamond ring, for example—unless it’s a really high-end or special ring, it’s mostly going to be valued by pawn shops for its gold weight. Therefore, it doesn’t matter if you spent $5,000 on the ring because you’ll likely be offered whatever its weight in gold is for pawn value.
Pawnbrokers do give cash for the items that they take on pawn or that they buy, but it’s usually not going to be as much as you think. Make sure that you ask about the options that you have because sometimes, you can get more in credit and if you are trying to buy something, it can be a good way to make an even trade. Also, if you’re pawning things to take care of serious expenses, you’re probably going to need to reconsider because it’s rare that you’ll get enough cash to cover what you need.
Pawn Brokers & Lenders
There are some things that you can do to help yourself if you are considering a pawnshop for the first time. It starts by educating yourself, which you’re doing by reading this guide. For those new to the world of pawnbrokers and considering checking it out, here are some things to keep in mind:
- Pawnbrokers are not all created the same
Companies can claim to be anything that they want, so make sure that you’re following up on those claims and vetting their reputation. There is nothing worse than pawning something of great value only to find out it was sold out from under you before the loan was up by an unscrupulous business owner.
- Make sure that you never pawn anything sentimental
First of all, it won’t get nearly as much monetary value as what it means to you. More importantly, if something were to happen and you couldn’t repay your loan, you could lose that item forever. You should only pawn items of monetary value that you don’t mind parting ways with in a worst-case scenario.
- You don’t have to take the first offer that you’re given
Pawnbrokers are always going to start low in their negotiations so that they can pay as little as possible. If you haggle back, you can get a better price for your items in many cases.
- You should make sure that a pawnbroker is licensed and properly certified before doing business with them
Anyone can claim to work in the pawn business but only trained, licensed pawnbrokers can make the right deals.
- Pawnshops are regulated at the state level, with interest rates varying from one state to the next
However, they usually range from 5-25%. You will want to read the terms carefully before you agree to any loan with a pawn shop.
- Make sure that you ask pawn shops what they can do and how they can help you
The best brokers will typically be willing to discuss their solutions and help you figure out how they can best serve your needs. That takes all the guesswork out of it.
- Make sure that you’re prepared to prove your ownership and have an ID issued by the government
It doesn’t matter what you are trying to pawn or where you live because these are minimum requirements. Pawnshops have to know that you are the owner of an item to protect themselves.
- The best items to pawn, in terms of value and demand, are jewelry, coins, firearms, high-quality power tools, and musical instruments. You can get value from other items, as well, but these are the most common.
- Classic cars and vehicles may be accepted by some, but not all, pawnbrokers
These are a specialty all their own that may take expertise outside of the realm of your local pawn shop. If you have a specialty item to pawn, make sure that you call around first and see what your options are.
- Choose a pawnbroker that is registered with the National Pawnbroker’s Association so that you can trust that they are held to a strict code of conduct and rigorous training and education requirements. This will ensure that you are working with the best shops.
- Usually, pawnshops will want the loan repaid in a lump sum, even if it takes you a little longer to save up the money. This makes it easier for them to track and saves them time and paperwork. Be sure to ask about this when signing your agreement so that you know what is expected of you.
Pros and Cons of Pawn Shop Loans
You will find several things to your advantage when you work with pawn shop loans that have a good reputation and that can help you get the loan that you need. Sometimes, you may even want to sell for cash to get a bigger profit or just get rid of the item(s) altogether. The option is yours when you are working with a pawnbroker. Here are some of the biggest pros and cons to keep in mind.
- Pawnbrokers can take almost anything and value it, giving you access to quick cash in the short term, which is often hard to come by.
- Pawnshops come in all sizes and you can even find them online, allowing you to get the best quote for your item by shopping around.
- You can use pawn shop loans as much as you want and as often as you want, so long as you repay your loans to recollect your items when they come due.
- You may be able to get more than you think depending on what you are pawning
- You can use this to pawn an item of value, get the money that you need, and then get the item back
- Pawning is a great alternative to short-term loans or lines of credit for some people
- People who have bad credit might find it easier to go through a pawn shop than to try to find a different lending solution that could involve credit checks or financial documentation.
- Pawnshops offer money the same day, and usually within minutes.
- When the item is sold, if you don’t pick it up, and it sells for less than the pawnbroker paid, they will not be able to hold you accountable in most cases.
- Pawnshops are trying to make a profit. Therefore, they’re only going to lend you as much as they absolutely have to. If they’re buying, they’ll probably want to spend even less.
- Pawnbrokers may not always give you a good deal if they aren’t among the most reputable—some companies exist just to try to take advantage of people.
- You aren’t going to get full value for something that you pawn.
- Even expensive jewelry is going to sell for a fraction of its value when you pawn or sell it to a pawn shop.
- You don’t have a say over how much money you’re getting.
- If you don’t repay your loan by the time it’s due, your items will be sold.
- Pawnbrokers can be an expensive way to borrow money.
- Some shops might give you trouble redeeming your loan if you lose your receipt.
Alternatives to a Pawn Loan
Some people might find themselves at the end of this article realizing that they don’t really have a way to get the cash that they need because they have nothing of value to pawn. It’s not like you see on reality TV where people walk in every day with historical or high-value items that are going to get you loads of cash on the spot—that’s the exception and they use it for TV for a reason. No one wants to see the guy pawning his basic guitar to get a little extra cash for rent.
If you are in a tight spot and pawning isn’t the solution for you, consider short-term installment loans and personal loans that you can find online today. There are several different options out there to choose from, but the first thing to know is that you do have options. Too often, people get caught up in the panic of needing money and make rash decisions that they don’t think through. That can only lead to trouble. Give yourself the time to learn about your options and find the solution that you need, even if your credit isn’t great or you don’t think that you have a lot of options.
Personal loans are one option that you have. These loans are available for people with good to excellent credit, although you may occasionally find loans for those with bad credit. It is more difficult to get financing when your credit is poor, though, so expect to have to secure the loan or pay a higher interest rate than those with good credit.
You can also consider just selling your items outright or selling them in an online auction so that they go to the highest bidder—literally. These are ways to get more for your items than you would at a pawn shop, which is probably only offering a fraction of the funds that you need.
How Pawnshop Loans Work
Although it’s a little different at every pawnbroker, the process is relatively similar from one place to the next. You will give the item to the broker, or send them a picture and information via the Internet, and then they will value it for you. They will base this information on several different factors, most of which they should explain as they go.
Your pawnbroker will also give you a “Pre Contract Credit Information Form” which allows you to fill out all of your personal information. if you’ve borrowed before, you may not need to fill one of these out. You should still ask for a credit agreement to sign, though, and look at everything in writing. If there is anything that you don’t understand or if you have concerns, express them before signing the agreement.
The agreement will provide guidelines on how long the pawn loan will last, how much it will cost, and what you are getting for your item in the meantime. You should also get a separate pawn receipt for when you are ready to reclaim your item by repaying what you owe. That receipt is what will prove your ownership, so make sure that you put it in a safe place.
Today’s pawn shops are sometimes doing things a little differently, using the Internet to speed up the process and help people value things from afar, so you may experience something slightly different with your local pawn shop. However, it won’t be too far off the mark. If you’re just looking to sell, rather than pawn, the transaction will be similar, albeit a bit more straightforward.
Most pawnbrokers also offer a 14-day period known as the “cooling off” period, where you will have the right to change your mind and withdraw from the agreement with no penalty on your part. You will simply pay the interest for the period that you used the loan and be done with it.
Pawnbrokers Aren’t Just What You See On TV
We already mentioned it, but it’s important enough that we’re going to say it again. Pawning is a legitimate business and it’s something that people do every single day. It is not, however, like it is shown on TV and you aren’t going to get top dollar for anything that you take to a pawn shop. Expect to get about ¼ to 1/3 of the value of whatever you’re pawning and be grateful if it’s anything more than that.
You’ll also want to watch out for less-than-reputable pawnbrokers and companies that claim to offer pawns or other loans—if you’ve never heard of them, you need to do your homework. Even if you have, it’s going to do you good to check out what they’re offering and make sure they’re not trying to take advantage of anyone. Too often, people get caught up in the glamorized idea of pawnbrokers that we see on TV and in reality, it is actually quite different. Now that you know that, you’re more likely to have a realistic experience of your own.
When it comes to avoiding predatory lenders, loan sharks, and unprofessional pawnbrokers, it’s all about being educated and knowing what your options are. With this information, pawning can become a useful resource for your lending needs.