If you are looking for some quick cash or have storage rooms full of items that you never use just gathering dust, you might want to consider heading for your local pawn shop. Although you could walk away with money at the end of the day, it is important to understand how pawn shops work before you even enter the shop. When you step into a pawn shop you have two choices – to pawn or to sell.
Pawning involves leaving something valuable as security for a loan whereas selling is when you'll get cash for the item. Never feel embarrassed or afraid to head off to a pawn shop, but make sure you know the ins and outs of how pawn shops work.
Pawnshops are not as bad as you think
Pawnshops are often painted as scary, shady places. They are extremely regulated by the
government. Most pawnshops pride themselves on providing great customer service.
Getting a pawn loan
All pawn shops offer collateral-based loans which means that the loan is secured by an item of value. You take something you own of value into the pawnshop, and if they are interested, they will offer you a loan. The loan amount is based on a percentage of the value of the item.
If you opt for a pawn loan, don't lose your pawn ticket. This is your receipt and summarises the term of your loan.
Repaying your pawn loan
There are two choices when it comes to repayment of your loan:
You return to the pawnshop to pay the loan amount with the interest payable before the
respective deadline and you will get your item back. Or, you don't return to the pawnshop and they keep your item. Besides never seeing your item again, that is the only consequence of not paying your loan. On average, about 80% of people return to pay back their loans.
Things pawn shops do and don't want
If you are considering pawning an item, keep the following in mind: Don't take in anything outdated or difficult to store, this is an immediate "turn-off "for pawnbrokers.
Instead, offer up jewelry, electronics, high-quality tools, or even musical instruments.
Getting through the red tape
Don't be surprised if the pawnshop asks a few questions about your item. They are legally
obliged to confirm that you are the rightful owner of the item. Don't be offended, the pawnbroker is just trying to make sure that both you and the item you are offering up are legitimate.
You will definitely be expected to show your ID though.
Advantages of using a pawnshop
Pawnshops are great if you need some quick cash. Just be careful not to get into too much debt into high-interest short-term loans. Pawnshops also don't perform credit checks on individuals because they have collateral as security and failure to repay results in the pawnshop owner keeping the item.