Here's how a pawnshop transaction works:
- Pawnshops offer collateral-based loans -- meaning the loan is secured by something of value. You bring in something you own, and if the pawnbroker is interested, he will offer you a loan. The pawnbroker then keeps your item until you repay the loan. The loan amount will likely be a small fraction of the item's actual value.
- You can sell your item to the pawnshop outright, but pawnbrokers are less enthusiastic about these transactions because loans offer much more profit potential for the pawnbroker.
- You must receive a pawn ticket. Don't lose this! Not only is it the receipt for your item, but it also summarizes the terms of your loan: fees, expiration date, description of your item, etc.
Repaying the loan
You have two choices on repayment:
- Return to pay the balance -- including the loan amount plus all added fees -- before the deadline, which is four months after the initial transaction.
- Don't return and the pawnshop keeps your item. Aside from losing your item, there are no other consequences: no collection action and no affect on your credit report. On average, though, 80 percent of all customers do reclaim their items, according to the National Pawnbrokers Association.
The interest rate explained
California State Interest Rates
The following is the California law on basic interest charges for pawnshops as of January 1, 2002. The actual law can be found in California Financial Code Section 21200.5. The description of the law below has been rewritten in laymen's terms. A 2.5% interest charge per month on the principle (loan amount) of the loan, including, but not more than $225. A 2% interest charge per month on a principle loan amount more than $225, including, but not more than $900. A 1.5% interest charge per month on a principle loan amount in excess of $900, including, but not more than $1,650. A 1% interest charge per month on a principle loan amount from $1,650 to $2,499.
Give us a RING at (209)677-PAWN
The following is the California law on basic interest charges for pawnshops as of January 1, 2002. The actual law can be found in California Financial Code Section 21200.5. The description of the law below has been rewritten in laymen's terms. A 2.5% interest charge per month on the principle (loan amount) of the loan, including, but not more than $225. A 2% interest charge per month on a principle loan amount more than $225, including, but not more than $900. A 1.5% interest charge per month on a principle loan amount in excess of $900, including, but not more than $1,650. A 1% interest charge per month on a principle loan amount from $1,650 to $2,499.
Give us a RING at (209)677-PAWN
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