A short term cash need can be met with no credit check or legal consequences if the loan is not repaid. A customer receives a percentage of the value the broker believes the collateral would bring in a sale. Although the loan to collateral ratio varies over time and across pawnshops, a loan of about 50 percent of the resale value of the collateral is typical. When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The ticket states the customers name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and amount that must be paid to redeem the item.
Most states regulate pawnshop interest rates and other charges, such as storage or insurance fees.
If a customer defaults, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time, generally one to three months. Most states require the broker to notify by mail the owner of the pledge that he will loose the right to his property unless he redeems it within the stipulated grace period. In case of default, some states require the collateral be sold at public auction. Thirteen states and the District of Columbia require any surplus from the sale of the collateral over the amount owed the pawnbroker, including accumulated interest and any costs related to the sale, to revert to the pawner. Repeat customers make up most of our business, similar to any other lending or retail establishment.