How does a Pawnshop work?
Pawnbrokers lend money on items of value ranging from gold and diamond jewelry to household items, etc. Items such as jewelry maintain their value over a reasonable period of time. Customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers and provide a credit score. Typically, loans are small but can reach as high as several thousand dollars or more depending on the value of the collateral. Contracts vary from state to state, but the average loan period is 90 days. In NYS it is four (4) months.
Interest rates will vary from state to state. In New York we are only allowed to charge 4 percent per month plus we charge, by law a nominal service and insurance fee. This is the lowest interest rate of any state and is a main reason why US Pawnbrokers is widely used. The process is much the same as other lending institutions, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid.