| By :
Nick Messe
Short on cash, but don't qualify for a traditional loan? You may want to consider the services of a pawnbroker. A pawnbroker is a business or individual that holds on to a person's belongings as collateral in exchange for a secured loan. Depending upon local law or business policies, a person usually has several months to purchase the item back for the loan amount, plus a small interest fee. If the loan has not been paid by the specified amount of time, the pawnbroker has the right to sell the item. Most commonly pawned items include jewelry, car stereos, televisions, computers, video games, CDs, DVDs, tools and musical instruments. Since pawnbrokers operate as lenders, they often take on additional businesses and sell other items, such as new clothing, weapons and rare items. Pawnbrokers operate differently than banks and other lenders in that no credit history or credit check is required. They assume all risk and liability for loans that are never repaid. However, they take many factors into consideration before offering a loan. They meticulously inspect the condition of pawned items, checking for scratches, missing parts and other damage. They also determine supply and demand for the particular item. They may not accept items if they are not selling quickly or if they are not brand-name. Pawnbrokers also assess the customer's item and their ability or willingness to pay back the loan. They may look for factors, such as whether or not the customer lives locally or if they are a returning customer with a good track record of repaying their loans. Pawnbrokers use the internet, catalogs and guidebooks to determine the resale amount of items. This in turn determines how much they will offer as a loan. Another way that pawnbrokers operate differently than traditional lenders is that they assume all risk for unpaid loans. They do not report defaulted loans on credit reports. Because the pawnbroker was given collateral as part of the loan, they can sell the item and recoup the loan amount. The pawnbroker may choose not accept items from that customer anymore, but it will not affect their credit in any way. Another difference between pawnbrokers and other lenders is that the process is quick and simple. With pawnbrokers, you get cash instantly. There is no need to wait weeks or months for the bank to come through. Also, there are often no forms to fill out, unlike bank loans that require hours of paperwork and notary services. Plus, the interest rates are often lower, only 3 to 5 percent on average. For those looking for small amounts of quick cash, pawning an item can be the best course of action. There are often no requirements and a pawnbroker will only accept saleable items that have not been stolen. The best part is that they will not turn down customers based on poor credit history.
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