ARE PAWN LOANS A SCAM??????
- July 7, 2017
- In Pawn
- By Amy Huang
As a pawnbroker, my friends and family will occasionally ask me “why would anyone pawn their valuables?” Or “aren’t the interest rates out of control?” And my favorite, “aren’t people afraid they are going to lose their things?” I have to admit I had these same questions when my own pawn business was just an idea and have come to realize that pawn, like any other industry, has it’s own urban myths and horror stories. Let’s look at the construction industry, everybody has a friend of a friend that paid workers a ton of money for incomplete work or no work at all. Or the jeweler that switched out a nice diamond for a junky one when doing a small repair. When it comes to any service, finding someone you can trust is huge and it’s no different in the pawn business.
Why would anyone pawn their valuables? The easy answer is to get fast cash without having to sell anything they don’t want to part with. There are also other benefits, pawn has been a trusted service for centuries and for good reason. Speed is everything when it comes to pawn loans. Bank loans require days if not weeks to go through and we don’t always have that much time. Many of my clients are simply waiting for payday and need some cushion to get through the week. Another problem with bank loans is the fact that you need freakishly high credit to even get approved, not with a pawn loan. A pawn loan is backed by your own personal property so your credit won’t get dinged when you start the loan and it won’t get trashed if you default.
Aren’t the interest rates out of control? Actually, no. These “payday loans” that have grown in popularity recently charge a fee of $15 per every $100 borrowed. At first it seems like a good deal but you have to figure in the fact that these loans are due in two weeks. That comes out to 390% annual interest! That’s a scam. Some banks offer a two week payday loan service and charge only half that, 195%. That’s a scam. The average pawn loan will fall between 25-45% annual interest and you have a four month term instead of just two weeks. Also, here in California all of our interest rates and fees are predetermined by the state to prevent rate gouging.
Aren’t people afraid they are going to lose their things? This is where it’s really important to find a licensed and reputable pawnbroker that you can trust. At Diamonds Forever in San Diego we rarely have a customer default on a loan and lose an item. We offer extended grace periods(sometimes months) as long as you stay in contact with us and we also allow our clients to renew a loan if they don’t have enough money to fully redeem an item. This allows our clients to pay the minimum charge and start a new 4 month loan instead of losing a sentimental treasure. All items in pawn are also fully insured and kept in a safe at all times.
See? We’re not so bad…
Thanks for reading!