HOW PAWNSHOPS WORK
A pawnbroker makes loans on personal property left as collateral.
The property can be redeemed when the loan plus interest is repaid.
The interest rates for pawnshops, which may be regulated by state or local
laws, may range from 5% to 6% a month. Loans can usually be renewed, but
only if the interest for the original period has been paid.
Pawnbrokers will accept a variety of personal property as collateral.
Usually, items that are small or of modest value (jewelry, clocks, computers,
camcorders, silverware, etc.) Brokers won't lend more money than they think
they can get if the pledged item is not redeemed and has to be sold.
When a pledged item is not redeemed, brokers are required to notify pawners
that the loan period has expired and to give them a final opportunity to
redeem their personal property before the broker has the right to sell the
item. In some jurisdictions, brokers may keep all the money received from
the sale of the unredeemed pledge. In other cases, the broker may only keep
the original loan and any interest due, but must turn any excess over to the
pawner.
In many states, pawnbrokers are required by law to file with the local police
a daily list of items that have been pledged. They must report and give a
description of the object along with serial number and other points of
identification.
This gives the police an opportunity to check these pledge items against any
list of reported stolen items. In somebody buys a stolen item from a
pawnbroker, it must be returned, and the broker must refund the purchase
price to the customer.
DEBT LIMIT. Installment debt should not exceed 10% of take-home pay. A debt
ratio of 20% indicates trouble ahead. However, when computing for your debt
ratio, you must not include mortgage payments in the amount of debt.
