A Pawn shop
is a business that accepts collateral in exchange for a short term cash loan.
These short term cash loans can vary from State to State. Pawn shops charge
monthly interest at a percentage and usually a loan origination fee. The percent
of interest your charged will vary depending on what state you're in when you
need a loan. A pawn shop is a very helpful resource for people who are strapped
for cash and have no way of borrowing from a credit card or wish not to take
a loan from a relative. Pawn shops will take any item of value such as TV, computer,
jewelry and many other things with a value. So here is an example of a typical
loan process using the state of Nevada's guidelines and policies for Pawn Shops.
you brought in a 14kt gold bracelet with diamonds. You paid $3000 retail for
it 10 years ago but it only has an intrinsic value of $800 meaning that if it
was scrapped for metal the Pawn Shop owner could melt the gold and sell the
diamonds whole sale and get $800. So the Pawn Shop owner could safely offer
a Loan of $700 with 13% interest and a $5 loan origination fee at 90 days. During
the 90 days you have the option to redeem or renew the item with the Pawn Shop.
If your money situation is still tight after the 90 days and you need a another
month or so you can opt to renew the item with the Pawn Shop for another 90
days which essentially means you would pay the 90 days of interest thus far
and loan origination fee of $5.
the item the loan basically starts over and the interest goes back to day one
with the loan originating fee being assessed again for $5. The last and final
step of the Pawn shop process is redemption or default. Redemption is exactly
how it sounds. You would bring in your ticket, pay back the original loan amount
and the interest accrued thus far along with the $5 loan fee. If you still cant
come up with the money borrowed at the end of the 90 days and cant afford to
renew you would then default on your loan and the Pawn Shop owner would then
sell or scrap your item to get back his money.
Shop would much rather have you continue to pick up your item and re-loan on
it then for you to default. If you default on your loan its not the end of the
world but Pawn shop owners to have a system to keep track of your loan history
and will adversely affect future loans if your defaulting more then your picking
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