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With the economy in shambles, people are doing interesting things to supplement their income. Options include freelancing, blood donations, and pawn shops. Laid off, discouraged workers are quickly turn to the pawn industry to bring in cash quickly.
Publicly traded Cash America International has seen its share price rise from $12 per share to over $22 in the last two months. British pawnbrokers Albemarle and Bond’s profits have increased from £24.9 million to £26.5 million. This is a worldwide phenomenon.
While credit card companies are slashing credit limits and denying new customers, pawn shops are happy to have anyone’s business. However, pawn shop lending may not be all it is cracked up to be. For those of you who do not know how pawn shops work, here is a quick rundown.
Pawn shops offer short term, generally 30 to 180 days, loans collateralized by personal property. For example, a pawn shop may give someone $1000 for a jewelry loan. The borrower has to pay back the $1,000 plus interest and fees. State laws limit interest that may be charged. If the borrower does not pay the loan back plus interest by the date specified in the loan, the pawn shop can keep the jewelry or sell it to anyone the like. Fees are generally around 2% per month and fees can easily reach 20%.
Popular items at pawn shops include jewelry, musical instruments, electronics, guns, and even cars. However, pawn shops will generally give little cash compared to the true value of the item and charge high fees, similar to payday loans, that turn pawning into a bad deal for the borrower.
Rather than take your belongings to a pawn shop, you might consider selling what you no longer use on eBay. While you do have to pay a small listing and PayPal fee, you do not have to pay interest to get your own stuff back. Do not use your property (other than for mortgages or car loans) as collateral for a loan. It is a bad deal for you if you do pay back the high interest and fees or if you take the low value on what your items are worth.
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