Society Journal

Pawn shops have been around since ancient times and were sometimes called the lender of last resorts; however, in more recent times, pawn shops are gaining in popularity due to the downward spiraling economy.

A true pawn shop will hold a customer’s merchandise as collateral which makes it different than a secondhand store which offers cash for Gold and other fine jewelry, paying the customer outright for their valuables.

Compared with a bank, pawn shop loans tend to be smaller amounts of cash for smaller periods of time with no credit check.  These loans are given on the spot with no processing time and all that is required is a valid picture ID and the person must be over 18 years of age. 

Pawnbrokers lend money to people who want their items, known as collateral, back at the end of the 30 day loan period.  Some of the top types of merchandise commonly pawned are gold jewelry, electronics and computers and power tools.

Pawnbrokers have reference books and formulas that help them determine the items’ worth. In determining jewelry prices, a pawnbroker will usually offer a customer approximately 50% of the smelting value of the gold.

A contract is drawn up between the two parties stipulating the length of the loan and the amount of the interest, which usually runs between 3 and 5% depending on the amount being lent.  At the end of the 30 days, the customer has several options.  One is to repay the loan with the interest and receive their collateral back.  Another option is to do nothing, at which time the pawnbroker then owns the collateral and can place it on their sales floor in order to recoup their money by selling it to someone who is interested in slightly used merchandise.  The final option would be to pay a small fee, usually $5, and extend the loan for another 30 days.

With today’s high price of gold, many pawnbrokers are allowing their customers to sell gold for cash instead of the traditional pawn and loan system.