How a Pawn Shop Works
A pawn Shop is a business franchise that offers money in terms of secured loans to people who bring in valuable items used as collateral. The person given the loan pays back with an interest. These shops have policies governed by the law that determine the amount of time and the interest rates they offer. If the loan is not paid within the agreed time, the pawnbroker offers the items for sale to other customers to help get back the money given.
A Pawn shop can also make money by either selling goods purchased directly from customers or from loan collaterals from customers who default on their loans. Identification documents e.g., a driver’s license or an identification card is required from an individual pawning an item to prevent people from using these shops to get money using stolen goods.
The loan given to an individual is based on the current value of the item, but it can also be determined by the shop’s current inventory at the time of the loan. For example, if you want to borrow money using a laptop and the shop’s inventory is full with the same items, you will get less money than if the inventory was low on laptops. An individual is given a contract credit agreement form to sign. This form contains the terms and conditions under which an item is pawned. The agreements sets out the period the loan will last and how much interest it will earn.
These shops offer loans on anything of value that can be sold. Loans are offered based on the current value, condition and the ability to re-sell the item. These arrangements make it easy for the shops to easily recover the money given out in case an individual fails to pay. Since they specialize in short term loans, pawn stores offer loans at low interest rates. All items are tested to ensure they work properly and appraisals are done depending on the type if the item.
Unlike bank loans, the consequence of a loan default is on the item pawned. For instance, if you fail to pay a pawn loan, the shop owner assumes the ownership of the item and eventually sells it to recover the amount of money given out.
Pawnbrokers offer services to people who can’t access bank loans due to lack of collateral needed by these banks. They offer what the bank does but on a smaller scale. They do not need days to approve the item and loans are instant once an agreement is reached.. You can get a short term loan with no credit checks and there are no legal consequences if the loan is not repaid.
Pawnbrokers give larger amounts of money for longer periods at lower costs. Interest is only paid on the actual period for which you use the loan. These loans are highly regulated and are governed by laws that apply to any other financial institution.
In conclusion, in case of unexpected emergency or one is in need of quick cash, pawn shops offer the most convenient options.