Pawnshops have long been a place where people can obtain quick cash, either by taking out a loan on a pawned item or selling merchandise on the spot.

“The definition of a pawn is something that people do when they would like to get their item back. There’s an emotional attachment (to it),” said Elizabeth Fries, a pawnbroker at Pleasant Hill Coin and Jewelry Exchange. “There’s plenty of people who are interested in just getting that short-term loan that won’t affect their credit rating.”

Many pawnshop customers do not have a bank account, according to the National Pawnbrokers Association. Pawn loans do not incur late fees, do not require credit checks and there are no legal consequences if the loan is not repaid.

The average pawnshop customer is 36 years old with a yearly household income of $29,000, according to association figures. Four of five people who use a pawnshop are employed, and two of three are renters.

“Pawnshops have always been perceived as seedy little places, holes in the wall. Frankly, we are a bank for a certain level of economic structure,” said Michael Krasow, president of Pacific Loan Co. in San Francisco.

Ken Gevertz of Gevertz Jewelry & Loan Co. in Oakland, Calif., provides an example of how a pawn loan works:

“Let’s say you pawn a guitar for $100,” he said. “The loan fee is $5 and the interest is $12.50 for 90 days.”

After three months, the person who pawned the guitar would have to pay $117.50 to reclaim it — the loan amount, plus the interest and loan fee.

“You don’t know the exact (reclaim) amount because you don’t know when the person is coming back,” Gevertz said.

The size of a pawn loan is tied to a percentage of the resale value of the item and can vary substantially depending on the merchandise and the pawnbroker.

“We don’t care what the (customer’s) credit history is. It’s based on the item,” said Diane Taylor, president of the California Pawnbrokers Association.

The average pawn loan in California is about $100, she said. Interest rates depend on the size of the loan and can vary among pawnbrokers, but rates cannot exceed caps set by state regulators, she said. The average monthly interest rate on all pawn loans is about 4 percent.

People who pawn merchandise have four months to buy back the item. Or they can make an additional interest payment to extend the loan if they want to reclaim the item at a later date. Merchandise that is not reclaimed can eventually end up for sale in the pawnshop.

In California, items must be held for at least 30 days before they are put on sale to ensure they were not reported stolen.


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