Pawnbrokers lend money on items of value ranging from gold and diamond jewelry to household items and electronics. This means that customers are able to obtain a loan and secure it by offering collateral. One of the benefits of this arrangement is that since an item is used to secure the loan the need to distinguish high risk borrowers from low risk borrowers is eliminated. That means that so long as a person presents an item of value we can lend against, they can receive a loan with a low interest rate without undergoing any sort of credit check or paying higher rates because of bad credit.
Contracts vary from state to state, but the average loan period is 90 days. In NYS it is four (4) months. Interest rates also vary from state to state. In New York State, pawn shops are only allowed to charge 4 percent per month and by law we charge a nominal one-time service and insurance charge to ensure that your items are safe. The process is much the same as other lending institutions, with the primary differences being the size of the loan, the surrendering of collateral used to secure the loan until the interest or the loan has been repaid. Typically, loans are small but can reach as high as several thousand dollars or more depending on the value of the collateral. Items such as jewelry maintain their value over a reasonable period of time due to the nature of how gold is regulated. Items like computers and electronics depreciate much more quickly due to the constant influx of new technology
Why would someone go to a pawnshop to get a loan?
Pawnshops offer the consumer a quick, convenient and confidential way to borrow money. A customer receives a percentage of the value the broker believes the collateral would bring in a sale, and in return has their item safely and securely stored in addition to borrowing the cash.
What is the foreclosure procedure?
If a customer defaults, or does not pay back the loan, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time (in NYS the pawnbroker must mail you a notice of the defaulting pledge one month prior to the actual default date). You must redeem your item before or on the due date OR extend it by paying the interest due and get another 4 months to pay your loan (5 months total since you receive a notice of default date warning one month prior to default date.)
Do most pawning customers lose their merchandise?
No. The national average for retention of items is 70 to 80 percent. At our shop, on average 85 to 90 percent of customers retrieve their items and pay back their original loans. Pawnbrokers offer non-recourse loans. That means that in the event that you do not repay the loan back or at least the interest to extend the time for repayment, the pledged item is used to recover their initial investment. It is entirely up to the borrower whether or not to repay the loan and there are no negatives registered on a credit report if you default or choose to forfeit the item.
I have heard that interest rates at a pawnshop are excessive. Is that true?
Interest rates for this type of loan in New York are the lowest in the United States (4%). This is much lower than a typical rate on a bank loan or credit card.
So what actually happens when you walk into a pawn shop?
Most pawnbrokers deal largely in gold jewelry, but we also deal with electronics, tools, collectibles, gold, platinum, designer, status watches and some estate jewelry. Loan consultants take their time and utilize their expertise to value your item and tell you how much they would be willing to lend. Many customers find the amount they are offered is larger than they need, but are pleased knowing they can take more value if needed at a later date. There are no credit checks, as your item is our security deposit, so those with bad credit can still pawn items. Prospective customers who wish to pawn items must be at least 18 years of age and have valid State, City, or Government identification. At the end of the process, you receive cash and a pawn contract, reminding you that the item is legally yours for at least the next four months and outlining the agreed upon terms of the transaction. Your item is then safely stored in either a safe or our temperature controlled storage. While in our possession, your items are not used or altered in any way, and the next time we see your item is when you come to redeem the item.
What happens If I can’t retrieve my item in the 4 month period for the loan?
After the forfeit date of the loan, we offer a 30 day grace period for your convenience. The interest will continue to run on the loan for the 30 days but it is still available for you to redeem or pickup. We provide you with a 30 day reminder for your convenience so you can make arrangements to reclaim your goods or extend the loan by paying the interest owed. If you fail to reclaim your item, we will then have to foreclose on the loan, making the item our property by law. You can also contact us to try to make arrangements if you’re having a difficult time. We are happy to work with you so you have every opportunity to retrieve your item(s).