From the name itself, you already have an idea about a business. A pawn shop is a place where you can get an easy loan or quick cash by using a valuable item as a collateral. It is a place where you can go and pawn your valuable items in exchange for cash.
However, every pawn shop has its own set of terms before you can get a loan. A shop can only accept certain items as collaterals for your loan.
We will give you an idea of how the business operates and how it gain profits from its transactions.
Getting a Cash Loan
As previously mentioned, there are only certain items that the shop can accept as an exchange for the approved loan amount. Normally, they will accept platinum, gold or silver jewelries as collateral.
The reason behind this is their value does not quickly depreciate, like other valuable items. Gold, for instance, plays a major role in commodity trading and its value is known to appreciate rather than depreciate. It is for this reason that those who would like to trade commodities store up gold in the hope that eventually, they will get more value than what they initially paid for.
Another reason why shops prefer jewelries is because they can easily assess their value and authenticity. There are trained and skilled consultants who can easily identify a fake jewelry from a genuine one. Unlike other valuables, jewelries can be assessed on the spot after presenting them to the shop. The consultant can appraise their value depending on their quality.
Finally, pawnshops prefer jewelries as collateral because they are not difficult to store. They do not take much space and are easy to secure in a vault.
After assessing the items, you will be quoted an amount as to how much you can get for the value of your item. The amount you are quoted is the total amount of cash that you can borrow from the shop.
Normally, you will receive a slip containing the amount you received, the interest that you have to pay and when you should pay it. Failure to pay for your item at the specified amount means that you are waiving your right of ownership for the items you have pawned.
Apart from just getting loan by pawning your valuables, you can also choose to sell your items. This means that you do not have any plans of getting your item again from the shop.
The thing about selling items is that the shop may ask you additional questions for security purposes. Do not be offended if the shop asks you questions to prove that you are indeed the owner of the items. Depending on the items you will be selling, you may be asked to show proof of ownership or a certificate before the shop buys it.
The only reason why the shop has to do this is that as a business the pawn shop must also protect its own interest. Without due diligence, the shop may be sold stolen items and that may cause a problem.
Depending on the shop that you will be dealing with, selling items would normally help get a higher amount of cash compared to you pawning it. The difference is that when you sell items, the shop immediately becomes the rightful owner of the items and they can do whatever they want with the items. Whereas, if you just pawn your items, the shop needs to safely secure it using locks and probably pay someone to look after it.
The shop pays an additional cost to keep it safe. This ensures that when you are ready to get it back, it is still on its best condition.
The pawn shop will also most likely sell unclaimed items or items that have been sold to them. If you buy back an item that you previously pawned and was unable to pay for it on the agreed time, then you can ask the shop if the item is still available for you to buy.
In most cases though, the shop will have available items that you can buy. These items are either sold items or unclaimed items. You must expect though that if you sold an item at a shop and you decide to buy it back, the price will most likely be higher than what you originally sold it for. The shop owner will be the one to decide on the amount they would like the items to sell.
These are the main transactions that a pawn shop deal with on a regular basis. If you really look at it, it is actually a trading place for cash and jewelries. If you are thinking of pawning your valuable items, then make sure to look for a reliable shop to ensure that the transactions will run smoothly.
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