Should You Get a Fast Loan from a Pawn Shop?

[May 29, 2010.]

 

There are more than 12,000 pawn shops operating in the U.S. and the average loan for a pawned item is $75, according to the History Channel. The TV channel's "Pawn Stars" show has given viewers an inside look into how pawn shops operate. If you have ever wondered what it is like to get a personal loan by pawning belongings, this show can help answer that question on some levels. But keep the following things in mind if you are thinking about seeking a personal loan this way.

—Pawn shops make fast loans with no credit checks. If you are desperate for money and have an item to hock, it's pretty easy to get cash this way. But pawn shops won't accept everything brought to them.

—You won't get full price for pawning your item. Even if you paid $500 for your favorite piece of jewelry, don't expect to receive a pawn shop loan for that amount. If you are fortunate you might get 50% of what an item is worth, and in many cases less. If you have an expensive item that you want to pawn, get an appraisal first so you have concrete numbers to negotiate with.

—Expect to pay high interest on loans borrowed from pawn shops. Some pawn shop loans may have annual interest rates (APRs) of 250% or higher. You can also expect high rates of interest for getting a quick loan from a payday loan shop. Depending on the state you live in, there may be a cap on how much interest can be charged for these fast loans.

—You must pay to get your belongings back. There also may be storage or insurance fees. If you don't pay what's owed plus interest by the deadline, which is usually about three months, you forfeit the item and the shop can sell it to reclaim money loaned to you.

—Pawn shops require personal information before giving out a personal loan. Plan to reveal personal information, including your name, address, and date of birth, and show a government-issued ID.

—When you pawn an item, it should get checked against police lists of stolen property. Depending on where you live, the local police also may make regular checks of whether or not pawn shops and second-hand stores are accurately reporting items received.

About 70% of items that are pawned are recovered by their owners. But think long and hard about seeking a fast loan from this type of lender because of the exorbitant interest rates involved, especially if you are thinking of pawning an item that has great sentimental value.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.