Pawn Shop’s Online

Pawn Stars

You can see a slightly glamorized version of how pawn shops work on the History Channel reality show, Pawn Stars. This program chronicles the operation of a family owned pawn shop in Las Vegas.

It does portray the process of assessing (even though most pawnbrokers tend not to rely so much on outside experts, as they do on experience and internet research) the value of an item while trying to determine a possible resale price range.

The History of Pawning

It is believed that the pawn shop business plan existed in China, much the same as it is today, 3,000 years ago.

In the west, pawn brokers made loans in the Roman Empire and ancient Greece. English Kings pawned jewels to raise money to wage wars.

Around 1450, in Italy, pawnbrokers assisted financially strapped people in the form of no interest loans secured by pawned items. Instead of paying interest, the borrowers were encouraged to donate to the church. After Italy, this practice spread to other parts of Europe.

It evolved into a national charity in Mexico called the Nacional Monte de Peidad which currently has over 152 branches all over Mexico.

What is a Pawnbroker?

A pawnbroker can be an individual or a company that provides loans secured by the personal property of the customer.  When an item is pawned, the customer receives the funds and the pawnbroker holds the item being pawned.

The customer can retrieve the item during the term of the loan. However, they will have to pay interest. The interest may be 10% per month. This means, if a loan is made for $100 for thirty days, the customer would have to pay $110 to buy the item back.

If they do not buy it back, the pawnbroker will resell the item.

Advantages of Using a Pawnbroker

Some of the advantages of working with a pawnbroker to obtain a loan are:

  • Even if you don’t pay back the loan pawnbrokers will not report you to the credit bureaus
  • You’ll discover the value of your item
  • You cannot fall into a debt spiral, no matter what you do
  • It’s a quick way to obtain ready cash
  • No credit check is required

A Typical Pawnbroker Customer

People who pawn personal items come from all strata’s of life. The National Association of Pawnbrokers has put together a profile of an average pawnbroker customer:

  • Age- 36 years old
  • Annual Income- $29,000
  • Education- 82% have a high school diploma or a GED
  • Employment- 80% of those who use pawnbroker services are employed
  • Residence- 33% own their own homes
  • Ethnicities- All ethnicities use pawnbrokers

Following are some general statistics about pawn brokers also compiled from the same source:

  • Pawn shop loans are provided to 30 million Americans each year
  • The average pawnshop loan is $80
  • The average reclaim rate is 80%

Assessing Value

Probably the most crucial part of the pawnbroker’s art is the ability to place a value on the items his customer’s desire to pawn.  Too high of a price and the pawnbroker will not make money if the item has to be resold. Following are some ways value is assessed:

  • Online research
  • The experience of the pawnbroker
  • The current demand of the item
  • Expert opinion

In addition, most pawnbrokers can test diamonds, gold and silver for authenticity on the spot. They will also test the item to see what working condition it’s in. For example, the pawnbroker will see if your television works, if your gun fires and if your antique pinball machine operates.

A pawn broker also develops a sixth sense about the value of an item. Using that with the techniques above makes most pawnbrokers accurate assessors of the value of almost any item brought into their shop.

Pawnbroker Paperwork

One of the big risks pawnbrokers takes is unknowingly accepting stolen property. In addition to having to follow federal guidelines, most states have record keeping requirements to adhere to. For example, in most states:

  • Each day the pawnbroker must submit a list of every piece of merchandise received including serial numbers
  • When you pawn an item, you must provide your valid driver’s license or other acceptable from of photo identification.
  • Each serial number is recorded
  • The pawnbroker has to abide by state privacy laws which means that all nonpublic personal information must be kept confidential

If an item is stolen, it’s taken by the police and returned to its owner. Then, the pawnbroker is out any money he loaned on the item.

Image by by maveric2003