How Pawn Shops Work 

A pawnbroker makes loans on personal property left as 
collateral. The property can be redeemed when the loan 
plus interest is repaid.


The interest rates for pawnshops, which may be regulated 
by state or local laws, may range from 5% to 6% a month. 
Loans can usually be renewed, but only if the interest for 
the original period has been paid.


Pawnbrokers will accept a variety of personal property as 
collateral. Usually, items that are small or of modest 
value (jewelry, clocks, computers, camcorders, silverware, 
etc.) Brokers won't lend more money than they think they 
can get if the pledged item is not redeemed and has to be 
sold.


When a pledged item is not redeemed, brokers are required 
to notify pawners that the loan period has expired and to 
give them a final opportunity to redeem their personal 
property before the broker has the right to sell the 
item. In some jurisdictions, brokers may keep all the 
money received from the sale of the unredeemed pledge. In 
other cases, the broker may only keep the original loan 
and any interest due, but must turn any excess over to the 
pawner.


In many states, pawnbrokers are required by law to file 
with the local police a daily list of items that have been 
pledged. They must report and give a description of the 
object along with serial number and other points of 
identification.


This gives the police an opportunity to check these pledge 
items against any list of reported stolen items. In 
somebody buys a stolen item from a pawnbroker, it must be 
returned, and the broker must refund the purchase price to 
the customer.


DEBT LIMIT. Installment debt should not exceed 10% of 
take-home pay. A debt ratio of 20% indicates trouble 
ahead. However, when computing for your debt ratio, you 
must not include mortgage payments in the amount of debt.




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