I have to admit that I’ve always had a strange bias against pawnshops.  To me, a pawn shop was a shady business located in some dark alley in the seedy part of town, dealing in stolen goods.  In my vision, the hairy tattooed proprietor was one level above “Vinnie the Loan Shark” and was just waiting to break some kneecaps.

I have no idea where this came from – probably from watching TV – but it’s definitely a faulty stereotype.

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Pawnshops are respectable businesses that offer a viable service in many communities.  Thanks to shows like Pawn Stars, they’re growing in popularity and commanding attention from sellers and buyers alike.

What is a Pawn Shop?

The main business of a pawn shop is to make secured loans on personal property left as collateral.  The pawnbroker assesses the item and offers the customer an amount.  The customer can redeem the property when the loan, plus interest, is paid.

If the pledged item is not redeemed within the agreed upon term, pawnbrokers are required to notify the customer that the loan period has expired, giving them a final opportunity to redeem the property.  Once expired, the pawn shop has the right to sell the item.

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Yes, the interest rates are high, but these are short-term loans, usually only a few weeks, on merchandise that is used.

What’s in it for you?

If you’re in the unfortunate situation of requiring some quick cash, a pawn shop could meet an urgent need.  If you are selling, then sites like eBay, Craigslist, or even the local classifieds would likely fetch a higher price.  But if you need the money now, or take out a short-term loan knowing it can be forgiven if you can’t pay it back, a pawn shop may be the place for you.

Unlike other lenders, pawnbrokers do not report defaulted loans on the customer’s credit report.

If you are a buyer, let me point out the upside of pawn shops – bargains, bargains, and more bargains.  Expect to find a large variety of goods; jewelry, power tools, electronics, cameras, computers and games, TV’s, watches, musical instruments, collectibles, etc, etc. at low, low prices.

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My musician brother-in-law always checks out a pawn shop on his travels and has picked up a few nice guitars for next to nothing.

How safe are they?

Pawnbrokers are interested in improving their image and in protecting themselves from being used to fence stolen goods.

The laws in many jurisdictions protect both the community and the broker from unknowingly handling stolen goods.  They must submit a list of customer transactions, including serial numbers and identifying information to the police.

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They are likewise given information about any stolen items they need to watch out for.  Pawn shops are prohibited from purchasing goods where the serial number has been removed or tampered with.

Check it out

Go to a pawn shop if you’ve never been to one before.  Ok, so they’re often located in the strip mall next to the XXX video store, but they’re attempting to get away from the run-down flea market look inside by arranging their items neatly and visibly on shelves and display cases.  They want to attract customers and entice passers-by to enter the shop.

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You do need to know your stuff and what comparable prices are for similar used items.  Pawnbrokers are not experts in all the items they offer.

Remember, a pawn shop is in business to turn a profit.  But nothing is set in stone.  Whether you’re a pawner or a buyer, everything is negotiable.

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6 Comments

  1. Joe on September 5, 2012 at 7:49 am

    Another reason the poor will forever be poor: they buy ridiculously nice things they can’t afford at a rent-to-own store or on a “15 months to pay” loan, then pawn them to get a small loan for another nice item, then pay an exorbitant interest rate on the tiny loan, then can’t pay it off and lose the item, so somebody with more money can buy it cheaply.

  2. Monique on September 5, 2012 at 4:13 pm

    I must confess, I do find myself watching Pawn Stars and some of those types of shows. I think pawnshops can be a viable option for certain items. I think the Craigslist/Ebay/garage sale route is still more advantageous, in terms of pricing, at least for selling. However, as you mention, it does require my time and effort on your end. Whereas, selling or buying an item in a pawn shop, is a transaction that can be completed right on the spot. But my experience has been pretty much limited to Cash Converters. It doesn’t seem as though any independent pawn shops are thriving in my area.

  3. Tony on September 5, 2012 at 6:17 pm

    I know a guy who got an iPod touch from a Quebec pawn shop for $30, and it was in great condition! Too bad I never have that kind of luck.

  4. SE Book on September 6, 2012 at 7:41 am

    I have been going to pawn shops for years looking for good deals, They are a great place to find hidden gems.

  5. W at Off-Road Finance on September 9, 2012 at 9:19 pm

    I’ve occasionally bought guns and musical equipment at pawn shops. They used to be a source of great deals because frequently the proprietors weren’t as knowledgeable as the buyers about specific types of merchandise. Since they got the merchandise dirt cheap, they didn’t need to be.

    Now with the internet it’s much easier to find the going rate on nearly any item. That’s more or less dried up the good deals.

  6. James on September 18, 2012 at 1:34 pm

    I had to laugh at the picture you painted with your description of a pawn shop. That is exactly what I always thought too. Years ago my apartment was broken into and a buch of easy to carry stuff have been taken, among the items was a custom handmade guitar I had gotten on a trip to Ecuador. The police investigating told me to check all the local pawnshops. I had that exact thought in my mind and (being younger then) couldn’t quite bring myself to go look. I wish I had, maybe I could have found it. Just because some criminals use pawnshops doesn’t mean the proprietor is a criminal.

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