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.
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