The Ins And Outs Of Pawn Shops

The United States is home to roughly 10,000 pawn shops, says the National Pawnbrokers Association (NPA). We've all heard of pawn shops, but few of us have ever sold or pawned items to them. Let's dig into the basics of pawn stores and see how they operate.

What Does Pawn Mean?

Pawn loans have three primary characteristics: they will never appear on credit checks or financial history reports, they are typically not large, and pawnbrokers are not legally allowed to ask for the money they loaned back. Keep in mind that pawn shops also buy products from customers, meaning that customers are not able to sell those products back to pawnbrokers to get their money back as in pawn loans.

How Do Pawn Stores Make Money?

These businesses, typically owned by independent entrepreneurs, make money through a variety of methods. Pawn shops primarily engage in the following activities: making pawn loans to people and charging interest, reselling new and used items that were purchased from customers, cashing checks, sending money orders, and selling cellphone services, among others.

What's the Typical Interest on Pawn Loans?

APR stands for annual percentage rate, or the total amount of interest accumulated on a loan in a year's time. The APR of pawn loans hovers anywhere around 75 to 150 percent per year. Most pawn shops charge interest by the month at around 10 percent interest. Keep in mind that defaulting on pawn loans automatically results in the transfer of ownership of your collateral to the pawn shop.

How Much Money Do Pawnbrokers Lend?

The typical range of return on items pawned to these stores is between 25 and 60 percent of what the item's fair market value is. Pawnbrokers refuse to purchase certain types of items, though this typically depends on owners' personal preferences. Pawn shops aren't the most popular way of getting money in a pinch, though they've served countless millions of Americans over the years. They offer several unique benefits to companies in financial services and specialize in jewelry pawn shop forest park.