These items maintain their value over a reasonable period of time and are easy to store, especially jewelry. All customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers. Contracts vary from state to state, but the average loan period is 90 days. Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid.
Pawnshops offer the consumer a quick, convenient and confidential way to borrow money.
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.