HOW PAWNSHOPS WORK

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.