Frequently Asked Questions (12)
Pawnbrokers lend money on items of value, and the merchandise taken can range from gold and diamond jewelry to musical instruments, tools and more!. These items maintain their value over a reasonable period of time and are easy to store, especially jewelry. All customers have some form of collateral, eliminating the need to distinguish high risk from low risk borrowers. Typically, loans are small averaging between $50 and $100, although they can be as small as $10 or as high as several thousand dollars depending on the value of the collateral. In Massachusetts, the length of the contract is regulated by the Commonwealth, which requires the pawnshop to hold the articles left for collateral for four months. Contracts vary from state to state, with the average loan period being about 30 days.
Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid or the loan period expires. The ticket is also called a pledge and anyone holding this pledge can redeem it, or get the articles back.
An analogy I like to use is a Dry cleaning business. You drop something off, and get a ticket. When you return with the ticket, you get your clothes back. If you don’t have the ticket, then the dry cleaner doesn’t know which clothes are yours. In fact, he won’t be able to tell whether you are there to pick up clothes, or dropping clothes off as a brand new customer. As such, the ticket is critical to maintaining state between you and the dry cleaner.
Pawnshops offer consumers 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 is not repaid. 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 of about 50 percent of the resale value of the collateral is typical. In other words, pawnbrokers feel their loan is “paid in full” at the time it is made. When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The 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 amount that must be paid to redeem the item. Most states regulate pawnshop interest rates and other charges, such as storage, mailing and/or insurance fees.
If a customer defaults by not repaying the loan, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time; in Massachusetts is after 4 months. Our state requires the broker to notify, by certified mail, the owner of the pledge, that he will lose the right to his property unless he redeems it within the stipulated grace period which is 21 days.
On average, over 90 percent of all loans are repaid. 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 should the borrower choose not to repay the loan. It is solely the choice of the customer whether he/she elects to repay the loan.
Less than one fifth of one percent of all collateral is even suspected as having been misappropriated in any manner. Thieves and robbers are a pawnbrokers worst enemy. Pawnbrokers work closely with local law enforcement to catch and prosecute these perpetrators. A customer must provide positive identification to show evidence of the transaction, a picture is taken, and a finger print is stored in our computer database.. 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 merchandise because the police can seize the merchandise and the pawnshop owner loses the collateral and the loaned money.
Mainly price. Pawnshops can offer you merchandise ranging from 1/3 to 1/2 off retail prices.
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 and multi-store operation to publicly held company chains. The atmosphere at a pawnshop is nothing like Rod Steiger’s depiction in the Hollywood production of “The Pawnbroker” — just come to visit us and see for yourself.
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 find employment, have less ability to repay their loans and the value of all merchandise goes down. Merchandise values go down because the major retail discounters sell for less to maintain or broaden market share. If retail merchants sell for less, pawnbrokers must loan less thus earning a smaller return. Regardless of income level, most people periodically borrow money. In good times, customers are more able to repay their loans and unredeemed merchandise sells faster because customers have more discretionary income.
Absolutely not. Indigents and derelicts 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, is of either sex, and occasionally needs short term cash for an unexpected bill such as a medical expense or car repairs. The typical pawnshop retail customer is a bargain hunter, either by need or desire and comes from all walks of life. Most pawnshop customers are repeat customers.
Neighborhood property values are impacted by 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. Again, come and see us for yourself.
To provide the loan 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. There are no hidden charges as with other lending institutions. On the other hand, pawnbrokers cost basis is far greater. They incur cost for security, handling, storage, and regulation not incurred by others. Due to the 10% 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 retail cost including additional floor space, gondolas, counters, personnel, advertising, shop lifters, retail competitive cost, and new merchandise cost to supplement the unredeemed goods.
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 required 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. Still in Massachusetts, we are required by law to take a picture of the customer, and we offer the option to have a digital fingerprint scan of our customers, primarily for their protection.