Pawnshops: A lifeline in times of crisis

 

A lot of people think Pawnshops are not that complicated. You take your valuables, you get an offer, you negotiate and come to a price you can both agree on and that is that. The business of Pawnbroking is more complicated than that and not every pawnbroker will be generous with their offer. And though, you will have to provide some collateral, it isn’t in the best interest of the Pawnbroker to have you default on your loan repayment. Sure, they can resell your items but Pawnshops aren’t second-hand dealers. A majority of their revenue comes from loans and not from selling items that have not been redeemed. The world of a Pawnbroker is not as glamorous as TV paints it out to be. Contrary to what you see on television shows like Pawn Stars, pawn brokers don’t  get excited by rare collectible items like the guys on these TV shows. They want those ordinary valuables that will be easy to resell. Antique jewellery isn’t something they would be fawning over nor will they be eager to buy antique guns, sports memorabilia or vintage Chanel bags. Ordinary people just don’t walk into a Brisbane pawn shop hoping to find Willie Nelson’s first guitar, or the actual hat that Johnny Depp wore in the first Pirates of Caribbean movie. They walk into a pawn shop hoping to find a cheap engagement ring or a flat screen TV  in good condition and a low price.  There is nothing glamorous about pawnshops, it is a place where people desperate for cash go for relief. The pawn shop industry however is a crucial industry that continues to help people get out of financial distress. It serves millions of people annually but this year it has been particularly busy because of the Covid-19 pandemic which has left millions of people without jobs.

If you have never been inside a Brisbane pawn shop before, it might be helpful to understand how Pawnshops serve people in need.

Who uses Pawnshops?

Anyone who needs fast cash. The logical thing to do when you need to loan some moneyto a bank. However, obtaining a short-term loan from a bank can be tedious and almost impossible. A bank will conduct a credit check- Pawnbrokers do not.

Banks will require proof of employment to make sure that you will be able to repay your loan. Banks will get you jumping through hoops and if you need $200, getting a pawn loan is easier, quicker and convenient. A lot of pawn shop customers have tried other avenues and failed.

A large percentage of pawnshop customers will have tried and failed to raise money from family and friends and many find that they don’t qualify for bank loans.

Pawning something that is valuable to you does not mean you are saying goodbye good bye to it. The idea is to get cash to meet your immediate needs and then pay the cash loan back so the Pawnbroker can give you your items back. A lot of pawn shop customers repay their loans to get their items back. More than 80% of pawn shop customers repay their loans and redeem their valuable items back.

Interest rates

Whilst pawn shops have their benefits over other short-term loan providers they aren’t exactly cheap. Interest rates can go as high as 300% APR. Some Pawnbrokers may even charge service and other fees on top of their regular interest rates.  There are other cheaper ways to get a small financial boost in case you need it however the main disadvantage with conventional loans is that you need to have a good credit history that will serve as proof to the lender that you can repay your loan. And if you default on your loan repayment, you will be putting your credit score at risk. This isn’t the case with pawn shop loans.

Know what your valuables are worth

Before you put anything up as collateral for a pawn loan, you should find out how much it is worth. You can search on eBay and other online retail sites what the price of similar items is. Alternatively, you can have the item independently appraised before you take it to a Brisbane pawn shop. This will give you an idea of what to expect. Knowing more about your item and its value could help you negotiate a decent loan that is as close as the retail price as possible.  Remember that Pawnbrokers run businesses that need to make profit. Remember too, that the Pawnbroker is taking some risk in giving you cash for something that might end up being difficult to sell right away.