WHAT IS PAWNING?
Borrow only what you need from a trusted, licensed pawnbroker. Pawning items of value offers a secure safety net loan that can cover unexpected financial needs. Banks, credit card companies, and traditional lenders cannot provide short-term, small-dollar loans.
"For consumers seeking safety net loans from a trusted, licensed pawnbroker, NPA answers the following questions about pawn stores:
1. What does a pawn store do?
The core of a pawn store’s business is making collateral loans. Pawn stores offer loans, secured by something of value. The pawn store may have other business elements such as retail sales. However, pawnbrokers focus on lending money.
2. How does a pawn loan work?
Customers bring in an item of value, and the pawnbroker offers a loan based on a percentage of the item’s estimated value. The pawnbroker then keeps the item until the customer repays the loan with interest and any additional fees that may apply. Pawn stores are regulated on a federal, state and local level.
3. How much money can I get for my item?
On average, customers receive only a portion of the item’s retail value. Remember, the pawnbroker is loaning money on the item, not buying it. The pawnbroker must consider the cost of storage, security and future demand for the item, along with the resale value if the loan is not repaid. The average loan amount nationally is $150. However, loans can be made for any amount, depending on the value of the pawned item.
4. What kind of interest rate will I have to pay on the loan?
Interest rates vary from state to state and usually amount to less than bank overdraft fees, utility reconnect fees, or credit card late fees. As an example, an $80 pawn loan at 25% for 30 days would cost about $20. Compare that to an overdraft fee or a credit card late fee that may negatively affect your credit.
5. What do I need to do to get a pawn loan?
In order to secure a pawn loan, you simply need an item of value and proper identification. Pawn loans do not require a credit check, bank account or co-signer.
6. What happens if I don’t repay my loan?
Defaulting on a loan can never affect consumers’ credit scores. Because the loan is based on collateral—that is, an actual piece of property—the loan is considered paid in full when the item is handed over to the pawnbroker."