What is a pawn loan?
So what is a pawn loan? Unlike most loans, a pawn loan is a short term loan that is secured by an item you own. To obtain a pawn loan, just bring in any of the following to a pawn shop near you along with a valid government-issued photo ID:
- Gold (and scrap gold too)
- Musical equipment
- and almost any item of value that’s sold at the pawn shop you visit.
How does it work?
Pawn loans can range anywhere from $25 to $10,000 depending on the value of the item that’s being pawned. However, the majority of pawn loans are usually under $100 or $200. A customer will bring in any item of value (jewelry, firearms, tools, musical equipment, electronics, etc.) and the pawnbroker will assess the item(s) by using a few different metrics.
- 1st the pawnbroker will evaluate the item in question and how likely it is to be redeemed.
- 2nd the pawnbroker will evaluate the customer’s history with the particular pawnshop to determine likelihood of redemption.
- 3rd the pawnbroker will determine what this item could sell for and how long will it take to sell if the customer does not redeem the item. This is known as the backup plan.
The item you pawn is held by the pawnshop until you repay the loan usually within 30 days. If you need more time, pawn loans can often be renewed for another 30 days. However, the terms of a pawn loan varies from state to state. If you do not repay the loan, the item you pawn is forfeited to the pawn shop and put up for sell to redeem the funds from the unpaid loan.
Are pawn shops after your item(s)?
As you can see from the steps above, all assessment metrics are geared toward the customer redeeming the item. According to the National Pawnbrokers Association, 85% of customers on average come back to redeem their item. In fact, the pawnshop business model is based on it with over 65% of revenue budgeted to come from pawn redemptions.
So in conclusion, contrary to what some may think, pawn brokers are happy to see customers redeem their items and look forward assisting them with the same item in the future. A pawnshop can only sell an item once, but if the item is pawned, it may be pawned several times if and when the customer needs help again in the future.
With this information, hopefully you are well equipped to make a decision on whether or not you’d get a pawn loan in the future.
If you have any questions about the pawn process or would like more information about pawn shops in Massachusetts, look to LBC Boutique & Loan.
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