Quick and easy, that is how one can aptly describe a pawnbroking loan. These are offered for a span of 6 to 7 months, though in most cases the amount is repaid earlier. The borrower needs to pawn something, which is of a substantial value. The pawned good is known as collateral and is held by the broker until the time the loan is paid back along with the interest payable. Apart from brick and mortar pawnshops,
online pawn shops have also made their presence felt in the market in recent times.
Pawnbroking has been around for quite some time and has acted as a useful source for gathering funds especially during emergencies or hours of need. The sector has seen a revival of sorts largely owing to the economic downturn. There has been increased demand for such fast cash. The steep increase in the price of gold can also be seen as one of the factors that has affected the pawnbroking market in a positive way. When the pawnbroker offers a gold-buying service, the number of people opting for the service naturally increase.
The loan amount ranges from 100 to 150 and at times the loan amount is equivalent to half of the value of the pawned item. The interest rate payable varies from 7% per month to an Annual Percentage Rate of 100%.
Like regular pawnshops, an
online pawn shop also has its set of criteria for offering loans to prospective borrowers. The broker adopts steps to ensure that the borrower is genuine. The identity of the borrower is first checked along with other relevant personal details.
The amount that is usually given out as a loan is not a substantial one. Therefore, it is not quite clear why a borrower should borrow money in the first place. However, the fact is that these loans are taken in order to solve medium term or short-term cash flow problems. Borrowers might take the loan amount hoping that they would manage to secure a higher income in the near future and thus payback the loan. However, there is no such concrete reason for which such loans are taken.
In most cases, as many as 80% of them, the loans are paid in less than half the time of the payback term. There is also evidence of the fact that borrowers repeatedly pawn the same goods to take stock of their cash-flow issues.
Traditionally pawn shops have been identified as located on some of the most high-end streets. At times, it is difficult to distinguish them from jewellery stores. However, there are a number of pawnbrokers who have established their presence online. They have their own websites which are used to market their products and services.
Pawnbrokers need to have an idea about the value of goods, so that they can correctly estimate their worth. This would eventually determine the loan amount. It is necessary that the transaction is transparent. This would prompt the borrower to come back to the pawnbroker rather than taking to a high-cost credit market.
