You’ve probably heard of pawn shops or seen them around town or at your local mall, but do you know what they are and how they work? Pawn shops or pawn brokers can be a saving grace if you require cash quickly. Understanding how they work can help you, especially if you’re in an emergency.
What is a Pawn Shop?
Pawn shops are retail stores that sell used items at a typically much lower price than the market value. Shopping at a pawn shop is like thrifting – you never know what treasure you will stumble upon. So it’s worth popping into your local pawn shop now and then if you love a bargain.
How Pawn Shops Work
While pawn shops can be great for consumers to get their hands on high-value items at a much lower price, they are also helpful for people who need money. If you need cash and have a high-value item, you can take it to your local pawn shop, which will give you two options.
You can sell your item to the pawn shop, which will provide you with cash in exchange. Or if it’s an item you don’t want to part with, you can use it as collateral for a loan.
If you prefer to take a loan rather than sell your item, the pawn broker will evaluate the item you bring in as collateral, taking into account its condition, its value, and whether it can be resold. If it meets their requirements, they will typically loan you between 25% – 60% of the item’s resale value.
Like any loan, you’ll be charged interest and the interest rate of a pawn shop lawn is different in each state. Sometimes you’ll need to pay fees, including storage and insurance. The loan term is usually 30 to 60 days, but this can sometimes be negotiated. If you don’t repay the loan in the stipulated timeframe, the pawn shop will sell your item to recoup the funds.
To pawn or sell an item to a pawn shop, you must be over 18 and have a valid identity document. In some cases, the pawn broker may need you to prove that you own the item or provide them with proof of purchase. This is to prevent people from trying to sell stolen items.
What Items are the Most Valued at a Pawn Shop?
Knowing what pawn shops buy is essential if you’re looking to sell or pawn some of your things. While you can sell almost anything in a pawn shop, some things are more in demand, which means you will get more money for them.
Popular items might vary by location, but TVs, phones, electronics, appliances, laptops and computers, jewelry, watches, tools, antiques, sports equipment, and musical instruments are always in demand.
Items that Pawn Shops Don’t Buy
While pawn shops will buy or hold as collateral a wide variety of items, there are some things they will not accept. It could be that from experience, these items don’t sell, they are of a subpar standard, or they are too low in value to be used as collateral.
Pawn shops will not buy anything broken or in bad condition as these won’t sell. They will also not accept fake or inauthentic goods, used movies and DVDs, and other random items like baseball cards, phone cases, and clocks. These items might have sentimental value to you, but their resale value is extremely low.
Should You Sell or Pawn?
When deciding whether to sell or pawn an item to a pawn shop for cash, there are a few things to consider. When you’re desperate for money or in an emergency, it’s easy to make a quick decision without thinking it through but before rushing to a decision, take some time to think it through.
If you have a high-value item that you don’t use, depreciates, and has no sentimental value, it might be better to sell it. This way, you don’t have to pay interest, and it’s a straight transaction. Items that fall into this category can be things like a TV or a mobile phone. These items quickly decrease in value as newer models with better features are introduced into the market every year, so holding onto them isn’t worth it.
Items like jewelry, antiques, and watches like Rolex increase in value. So it’s good to use these as collateral rather than sell them, because when you sell them, you only get up to 60% of their value.
Pawning these items allows you to get the cash you need but still get the items back after repaying the loan. Often, these items are not used all the time, so letting a pawn shop hold them while you get the money you need makes sense.
Another time you might prefer to pawn an item rather than sell it is when it has sentimental value. This is often true for items that are family heirlooms. Even though the item’s value might not increase much, it’s better to use it as collateral, knowing that you’ll get it back once you’ve repaid the loan since it has emotional value.
Pros and Cons of Pawn Shops
Before taking your items to a pawn shop, it’s good to know the pros and cons.
A benefit of going to a pawn shop for a loan is that it doesn’t matter if you have a low credit rating. Pawn shops don’t run credit checks, and getting a loan from a pawn shop won’t affect your credit score. Getting a loan from a pawn shop is a quick process, which means you will get the cash quickly. If you’re unable to pay back the loan, there are no legal repercussions. They will simply sell the item you pawned.
The disadvantages of pawning or selling your items to a pawn shop are that you only get up to 60% of the item’s value, and interest and fees can be high.
- Pawnshopstoday: How it Works
- Wisegeek: What is a Pawn Store
- Millsjewelerscamarillo: Top 10 Reasons Why Pawn Shops are Important
- Nerdwallet: Should You Take a Pawn Shop Loan
- Gobankingrates: Best Things to Pawn to Get Quick Cash: What do Pawnshops Buy?
- Bestcollateral: Is it Better to Pawn or Sell at a Pawn Shop
SUBSCRIBE FOR MORE! HERE'S WHY:
1. You get 7 free books
2. You get the best money & productivity articles
3. You get the latest updates - all in one email per week