There are times when you will find yourself in a tight financial position. When this happens, you might need quick, cold cash. If you have an attic or storage room filled with antiques and other valuables that are just gathering dust, you can consider pawning them.
How do pawn shops work?
A pawnbroker will loan you money depending on the value of your collateral, or the item you decide to pawn. The loan includes an interest rate depending on the amount you received, which you will pay on a fixed term. You can claim your property after paying off the loan. But if you fail to meet the deadline, the pawnbroker may forfeit your collateral.
Generally, compared to bank loans, the terms of pawn loans are much looser, the process is quicker, and there are fewer requirements for the application. So if you don’t have the time or the credit score to get a loan from a bank or other financial institutions, a pawn loan is your best choice.
Before you head over to your local pawn shop, here are a few questions you should ask the pawnbroker to ensure the security of the transaction.
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What are the terms and conditions I need to know?
U.S. pawn shops operate under federal and state laws, so their prerogatives and terms vary per state. For instance, pawn shops in Salt Lake City, Utah may have a different payment term and application for extension process than shops in Jefferson City, Missouri. If you want to look up pawn laws particular to your location, the National Pawnbrokers’ Association has a list of state pawn shop laws.
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How long have you been in the business?
Ask about the background of the shop and pawnbroker to assess the reliability of the service. You can also ask to see his or her pawnbroker license and other accreditation to be sure of the credibility of the business.
Also, inquire about the items that are usually pawned in their shop and if they’ve experienced a break-in or other similar incidents before. You want to be sure that they’re capable of safeguarding your valuable item while it’s in their possession.
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Do you have any notification service in place?
Although it’s not a requirement, establishing a notification system is an added convenience feature and safety net for both parties. As the client, you can get updates about when your payment is due, how many days you have left before the deadline, or if your loan is finally paid and you can claim your collateral. In case of accidents or emergencies, the pawnbroker can also notify you of the damage on your item, if any.
For the pawnbroker, this will help them keep track of all the loans that are currently active. It may also help prevent late payments and extensions from customers if they’re reminded of when they should pay.
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Do you have insurance?
Again, this is important so you can assess whether the shop is fully capable of safeguarding your valuable possessions. In case of disasters, like fire or flood, you want to know if the pawnbroker will compensate you for your item.
Pawn loans are quick, easy methods to gain cash. But it’s just one of the methods you can get a loan. Consider your financial need at the moment and ask the pawnbrokers these questions to determine if pawning your jewelry or car is the best solution.
