Pawn Brokers

Pawnbrokers, also known as pawn shop is a human being or business that offers secured form of monetary assistance against own property used as security. Such pawnbrokers usually accept items such as jewelry, musical instruments, computers, home audio equipment, video game systems, televisions, cameras, power tools, or any other relatively valuable items. When like a pawnbroker you have got two choices- you can also leave your precious as security for the advance or sell it to the pawnbroker.

When you have placed an item as a pawn against a loan you may redeem it once the contractual period of time is over and you have repaid back the loan amount along with the interest. The amount of loan offered, repayment term, and rate of interest are either governed by the law or the pawnbroker’s policies. If you are unable to pay off the loan within the repayment term, the pawned item will be sold off by the pawnbroker. Unlike typical loan lenders, pawnbrokers will never report the defaults on the customer’s credit report since they have physical possession of the offered collateral and may regain the loan value by selling the item. There are many pawnshops that also trade items in their shop for items brought by customers.

Once you have signed the agreement, you will be provided with a separate pawn receipt by the pawnbroker that you should keep safe to prove you own the item. You can redeem your item by paying what you owe and showing the receipt. If you are unable to repay the loan the pawnbroker has the right to sell the item to recover the cash.

Generally, customers are provided with a 14-day cooling-off period. During this period you are free to withdraw from the agreement and pay interest only for the period of the credit. When searching for pawnbrokers, make sure you choose one that is a member of the National Pawnbrokers’ Association that has a code of conduct for members.

Compared to high street bank loans the interest rates charged by a pawnbroker is more, but normally a lot less than what a payday lender charges. Depending on the pawnbroker, you may be charged a monthly or daily interest rate. You can shop around to check the annual interest rate charged by different pawnbrokers and find competitive rates. As per your repayment ability, you can repay back the loan in installments or in one single payment. If you need to extend the term you will have to request to the pawnbroker.

Some of the pros of pawnbroker loans are-

• Borrowing a loan from mainstream lenders when you do not have a perfect credit status might not be easy. But pawnbrokers are likely to accept your loan request despite credit issues.
• The process is quick and you can have the cash in hand within a day.
• Usually a pawnbroker will allow you to redeem your item at any time. You will be charged with interest-only for the period you have borrowed the loan.

Some of the cons are-

• Borrowing pawnbroker loans can be relatively expensive.
• You can borrow only a percentage of the value of the pawned item.
• If you fail to repay back within the term the ownership of the collateral will automatically pass to the pawnbroker and they are free to sell it to recover the money.

It is important to know the value of the item you pawn so that you can claim if the pawnbroker has sold the item for less than what it is worth. You can file a complaint in writing to the pawnbroker. You can take your complaint to the Financial Ombudsman Service (FOS) if the pawnbroker doesn’t respond or if the problem is not sorted out within eight weeks. You can also take the pawnbroker to the Small Claims Court, but you will have to pay a fee for that and the settlement may not always be in your favor.

Jason Caitlin is a senior financial advisor at Payday Castle with an acumen for finance. He helping individuals and families achieve their financial planning goals and providing advice on Investment Planning.
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