11-24-2011, 11:56 PM
NEW YORK â Pawn shops are beckoning from the shadows.
At a time when banks have shut their doors on those with bad credit, a growing number of U.S. borrowers are pawning their jewelry, electronics and other valuables to make ends meet.
Consumer advocates say the development is worrisome because the interest rates on loans from pawn shops can be as high as 20 percent a month. But pawn shop operators say they provide a critical lifeline to a group with few other options.
âItâs a short-term loan â itâs designed to bail someone out and be done with it,â said Ed Bean, who owns Suffolk Jewelry & Pawnbrokers in Boston.
A common misconception is that pawn shops simply buy the various knickknacks that customers bring in. But the more lucrative aspect of the industry is issuing loans against those belongings. Customers often prefer borrowing over selling as well because it lets them hold on to what may be their only tickets to cash in the future.
Whatâs key about loans from pawn shops is the lack of judgment; a credit check isnât required and they donât have an impact on credit scores. The transaction takes just a few minutes in many cases.
A pawn shop owner simply eyeballs the merchandise a customer brings in and offers a loan amount on the spot. If the customer repays the loan within 30 days, the belongings can be reclaimed. The customer can also opt to extend the loan; many borrow against the same items over and over.
If a customer fails to repay the loan, the shop can put the collateral up for sale.
The National Pawnbrokers Association says its members are reporting record growth as a result of persistently high unemployment, coupled with soaring gold and metal prices. The group says the popularity of the shows âHardcore Pawnâ on truTV and âPawn Starsâ on the History Channel are opening the industry to a broader customer base as well.
Although the vast majority of pawn shops are independently owned, the latest quarterly profits at the three publicly traded pawn store operators reflect the growth the industry is enjoying. Cash America International Inc., Ezcorp Inc. and First Cash Financial Services Inc. each reported net incomes that were up at least 25 percent from a year ago, helped by rising demand for loans.
http://www.courier-journal.com/article/2...|text|Home
At a time when banks have shut their doors on those with bad credit, a growing number of U.S. borrowers are pawning their jewelry, electronics and other valuables to make ends meet.
Consumer advocates say the development is worrisome because the interest rates on loans from pawn shops can be as high as 20 percent a month. But pawn shop operators say they provide a critical lifeline to a group with few other options.
âItâs a short-term loan â itâs designed to bail someone out and be done with it,â said Ed Bean, who owns Suffolk Jewelry & Pawnbrokers in Boston.
A common misconception is that pawn shops simply buy the various knickknacks that customers bring in. But the more lucrative aspect of the industry is issuing loans against those belongings. Customers often prefer borrowing over selling as well because it lets them hold on to what may be their only tickets to cash in the future.
Whatâs key about loans from pawn shops is the lack of judgment; a credit check isnât required and they donât have an impact on credit scores. The transaction takes just a few minutes in many cases.
A pawn shop owner simply eyeballs the merchandise a customer brings in and offers a loan amount on the spot. If the customer repays the loan within 30 days, the belongings can be reclaimed. The customer can also opt to extend the loan; many borrow against the same items over and over.
If a customer fails to repay the loan, the shop can put the collateral up for sale.
The National Pawnbrokers Association says its members are reporting record growth as a result of persistently high unemployment, coupled with soaring gold and metal prices. The group says the popularity of the shows âHardcore Pawnâ on truTV and âPawn Starsâ on the History Channel are opening the industry to a broader customer base as well.
Although the vast majority of pawn shops are independently owned, the latest quarterly profits at the three publicly traded pawn store operators reflect the growth the industry is enjoying. Cash America International Inc., Ezcorp Inc. and First Cash Financial Services Inc. each reported net incomes that were up at least 25 percent from a year ago, helped by rising demand for loans.
http://www.courier-journal.com/article/2...|text|Home