In more ways than one, getting a loan from a pawn shop usually defies expectations. People see television shows about pawn stores and may enter into a pawn shop with an idea in their head about how the experience is going to go. But, in reality, most pawn customers are looking for a safe place to borrow a little money to get by, and most don’t take out more than they need, and the majority return to claim the goods they left as collateral.
The National Pawnbrokers Association reports that the average pawn customer is 36 and makes about $29,000 a year. A third of pawn customers own homes, and 80 percent are employed and have their high school diploma or GED.
The average pawn loan is about $80. But often, customers come in expecting an item’s appraised value. Chances are, when an item is pawned, the person who is pawning that item will not receive what the item is worth. For example when pawning gold or jewelery, the pawn shop will only pay what the weight of the gold or silver used to make the piece, which could only amount to 1/6 of what that item was originally worth. Pawnshops have to make money, even when borrowers default on a loan.
Some pawnbrokers recommend shopping around for the best price, but others suggest that the loans and fees aren’t likely to vary.
Caps on interest rates are set by the state. In Georgia, pawnbrokers can charge up to 25 percent interest every 30 days for the first three months, and 12.5 percent every month after that.
In South Carolina, interest is charged along a sliding scale. Pawnbrokers charge anywhere from 25 percent on a $50 loan to 5 percent on a $1,000 to $2,000 loan. Pawnbrokers in South Carolina can’t give loans for more than $2,000.
Both Georgia and South Carolina offer a grace period for unpaid pawn loans. In Georgia, pawnbrokers offer a 10 day grace period on all transactions, except for vehicles, which receive 30 days. During the grace period, pawnbrokers can’t resell the item, even if the bower has failed to repay the loan. In South Carolina, the grace period is 60 days after the pawn is due.
Some stores offer more generous grace periods than the law requires.
At Traders Loan and Jewelry, customers pawn a variety of items, including tools, musical instruments, sports memorabilia and electronics. Every now and then, heirlooms, such as wedding china, are pawned.
Pawn shops will generally look at any item to consider it to be pawned, but when it comes to electronics, though, if the serial number is missing or altered, pawn shops won’t accept the item.
Most shops are careful not to deal in stolen goods. Pawn stores give a report every week to local police departments to check for any item that has been reported stolen. And they are extremely detailed.
Pawning is an ancient business, and many local stores have roots in the community. Trader’s Loan & Jewelry has operated in the San Fernando Valley since 1954.
Most of the time pawn stores are loaning money that the banks don’t loan. They will make small loans, like the ones that can get a customer through until payday. Pawnbrokers are the original microfinance lenders.
ADVICE FROM PAWN PROS
- BRING ID. You’ll need it to pawn items.
- ASK QUESTIONS. The pawnbroker behind the counter might have particular expertise in the item. If they know anything interesting about an item, They’ll do their best to educate the customer and pass on that knowledge.
- EXPECT A PAWN TICKET that details what item you pawned, how much you have to repay, and how long you have to repay it. Ask for clarification if any of the terms aren’t clear.
- ASK ABOUT OPTIONS TO EXTEND LOANS if you’re not ready to repay. Most loans can be extended for 30 days at a time, with additional fees.
- EXPECT ABOUT 20 TO 25 PERCENT of an item’s value. With items like gold or silver jewelry, it often doesn’t matter if the item is damaged. It can still be pawned or sold for the value of the gold.
- WEIGH THE COSTS AND BENEFITS. Pawn loans have substantial interest rates, but, unlike other loans, failing to pay the loan has no impact on your credit.