How it Works
How the Pawn Process Works
Put simply—customers pledge property as collateral, and in return, pawnbrokers lend them money. When customers pay back the loan, their merchandise is returned to them. Pawn loans are made on everything from jewelry to electronics. If the customer elects not to redeem his or her collateral, there is no credit consequence to the borrower and the items are sold at a value price to retail consumers.
Regulation & Compliance
Pawnbrokers are governed by all of the major federal laws that apply to other entities designated as financial institutions, including:
• USA Patriot Act
• Truth-in-Lending Act
• Bank Secrecy Act and IRS regulations requiring reporting of certain cash transactions
• Trading with the Enemy Act and related Executive Orders and regulations
• Privacy provisions of the Gramm-Leach-Bliley Financial Services Modernization Act
What’s “The Deal”?
Pawn stores offer collateral loans for surprisingly low interest rates. They specialize in short-term small loans.
Pawn stores can offer this type of deal because the customer offers personally owned property as collateral, which significantly reduces the risk for the lender. When the customer pays the loan back, the property is returned. In the U.S., over 80% of all collateral property is re-claimed.
Pawnbrokers also lend larger amounts of money for more flexible periods of time at lower cost. If you take a secured short-term loan from a pawnbroker, you will only pay interest on the actual period for which you use the loan.
Secured short-term loans from pawnbrokers are highly regulated, and all the terms of business are clearly stated in a government-regulated contract.
So, if you are looking for a secured short-term loan and don’t qualify for a loan from your bank or credit union check out what the Pawn industry has to offer!