FAQs

Question: How does a pawnshop work?

Response: Pawnbrokers lend money on items of value. Many items maintain a reasonable value over time and are easy to store, especially jewelry. All customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers. Typically, loans are small averaging between $70 and $100, although they can be as small as $20 or as high as several thousand dollars depending on the value of the collateral. Contracts vary from state to state, but the average loan period is 30 days. Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary differences being the size of the loan and the fact that customers provide items of collateral until the loan has been repaid or the loan period expires.

Question: Why would someone go to a pawn shop to get a loan?

Response: Pawnshops offer consumers a quick, convenient and confidential way to borrow money instantly. A short term cash need can be met with no credit check or legal consequences if the loan is not repaid. A customer receives a percentage of the value according to what the broker believes the collateral would bring at the time it is sold. When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The ticket states the customers name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and amount that must be paid to redeem the item. Most states regulate pawnshop interest rates and other charges, such as storage or insurance fees.

Question: What is the foreclosure procedure?

Response: If a customer defaults by not repaying the loan, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time, generally one to three months. Then the pawnbroker can sell the item at his/her discretion.

Question: Do most pawning customers lose their merchandise?

Response: On average, 70 to 80 percent of all loans are repaid. Repeat customers make up most of our business, similar to any other lending or retail establishment. Pawnbrokers know the vast majority of their customers because they often borrow against the same items more than once. Pawnbrokers offer non-recourse loans, looking only to the item being pledged to recover their investment should the borrower choose not to repay the loan. It is solely the choice of the customer whether he/she elects to repay the loan.

Question: How can I be sure the merchandise I purchase at a pawnshop isn't stolen?

Response: Less than one fifth of one percent of all collateral is even suspect as having been misappropriated in any manner. Pawnbrokers work closely with local law enforcement to catch and prosecute people who steal merchandise. A customer must provide valid identification when making a pawn transaction. This information is then presented to the police department, therefore decreasing the likelihood that a thief would bring stolen merchandise to a pawnshop. Pawnbrokers are trained to look for signs in order to avoid stolen property. It is not in the interests of the pawnbroker to accept any merchandise that could be potentially stolen. In fact, police will seize all stolen merchandise leaving the pawnshop owner without the goods and without the loaned money.

Question: What is the difference between buying at a pawnshop and buying at a retail store?

Response: Mainly price. Pawnshops can offer you merchandise ranging from 30% to 60% off retail prices. Pawn shops also have access to a variety of goods in many different categories that a typical retail store just wouldn't be able to match.

Question: How has the image of pawnbroking changed over time?

Response: Today's pawnbroker is upgrading everything from the interior and exterior of his or her shop, employee presentation, customer service, signage, marketing and quality of merchandise. Pawnbrokers focus on providing exceptional customer service and are very active in the community, both politically, and in local charities. Pawnshops today range from a single and multi-store operation to publicly held company chains. The atmosphere at a pawnshop is nothing like Rod Steiger's depiction in the Hollywood production of "The Pawnbroker" – come in to see for yourself. You'll be very surprised.

Question: Are pawnshops a "bad times industry?

Response: Pawnshops survive bad times if they make adjustments both at the retail and loan counters, but they do far better in good times. In hard times, customers move away to find employment, have less ability to repay their loans, and the value of all merchandise goes down. Merchandise values go down because the major retail discounters sell for less to maintain or broaden market share. If retail merchants sell for less, pawnbrokers must loan less, thus earning a smaller return. Regardless of income level, most people periodically have to borrow money. In good times, customers are more able to repay their loans and unredeemed merchandise sells faster because customers have more discretionary income.

Question: Do pawnshops attract indigents and derelicts?

Response: Absolutely not. Indigents and derelicts have no assets to use as collateral. No one builds a business around the people who have the least. The typical pawnshop loan customer is employed, living within a few miles of the store, and occasionally needs short term cash for an unexpected bill such as a medical expense or car repairs. The typical pawnshop retail customer is a bargain hunter, either by need or desire and comes from all walks of life. Most pawnshop customers are repeat customers.

Question: Do pawnshops downgrade the neighborhood and hurt property value?

Response: Neighborhood property values are impacted by the appearance and care given to the properties. There is no factual basis to support a claim that an eye-pleasing pawnshop negatively impacts values. On the contrary, if they attract customers, they enhance the opportunities for other merchants and become a true asset for the community.

Question: Are pawnshop rates excessive?

Response: To provide the loan service, all lenders must charge rates commensurate with risk, size and duration of the loan, collateral offered, and recourse. Pawnshop loans are small dollar, short duration loans. The item stands as the sole collateral offering no other recourse, and pawnbrokers are liable for replacement value if something happens to the item while in their care. There are no hidden charges or fees as with other lending institutions. On the other hand, pawnbrokers cost basis is far greater. They incur cost for security, handling, storage, and regulation not incurred by others. Due to the 15-20% of pawn shop customers that elect not to repay their loans, pawnbrokers are forced to turn their "bad debt" into a retail center to recover their cost. Other lending institutions do not incur retail cost including additional floor space, gondolas, counters, personnel, advertising, shop lifters, retail competitive cost, and new merchandise cost to supplement the unredeemed goods.

The services provided by pawnshops include:

1. Discount Retail (new and pre-owned) is an opportunity for customer to make their dollars go further, allowing for more discretionary funds.

2. Short-term credit enables the community to pay the bills of other local merchants such as groceries, medical expenses, utilities, auto and transportation to work.

3. Outlet for instant cash for goods of value that are no longer used.

The pawn business is a neighborhood business with the majority of customers residing within a few miles. The customer base is the surrounding neighborhood. As your neighbors, we are concerned about our neighborhood and making it the best it can be. We're happy to be here, and are excited for the opportunity to serve Naperville for years to come.