So you need cash, quickly, and are thinking about pawning a ring or guitar — the way you’ve seen others do on TV? Here are some suggestions from Good Housekeeping to help you find the right course of action:
Learn before you leap • The time-tested practice of pawning is on the uptick, no doubt because of the hot TV reality show “Pawn Stars,” which documents the doings at the Las Vegas shop. But that series, and others like it, usually focus on rare finds that are sold for a flat fee, not pawned.
The real heart of pawning is short-term “safety net” loans for more ordinary items. Here’s how it usually works (no matter what The Old Man might do on TV). You bring in your item, the pawn broker makes an offer, and then — after some negotiation — he or she gives you cash. If you want to get your item back, you have a set time period — often 30 days — to repay the loan with interest. Default on the loan, and the prize goes to the pawn broker, who then has the right to sell it. What’s more, there’s a whole online pawning industry for people who don’t want to set foot in a pawn shop. Either way, you have to learn the ropes so you won’t sell yourself short.
A pawn shop shouldn’t be your first stop • Although it dangles the promise of cash in exchange for gold, watches, musical instruments and more, the pawn shop should be a last resort, for when your credit cards are tapped out and you can’t get a family loan.
Watch out for the interest rate • You’ll pay very high interest rates at a pawnshop — up to 25 percent per month — compared with the average credit card rate of about 15 percent annually, or $30 per year on every $200 borrowed. On the plus side, pawning will not put red flags on your credit record — even if you default.
Know when to go online • Brick-and-mortar shops offer small, short-term bridge loans, which last year averaged $150 nationwide and usually were due within 30 days. But deep-pocketed pawngo.com — backed by the Internet giant Lightbank, which founded Groupon — caters to customers who have pricier items (think Rolex watches or large diamonds) and offers loans averaging almost $2,000, usually with three- to six-month terms.
Pawngo.com also charges a 6 percent interest rate, $60 monthly on a $1,000 loan. You provide as many details as possible and, ideally, upload a photo. Pawngo.com will make a preliminary offer, then pay to ship your item, insured, to its offices. A final offer will be made; you choose whether to accept. To use pawngo.com, you must have a bank account so the site can electronically transfer funds to you and deduct the interest charges.
Don’t be afraid to ask questions • “During the tough economy, people are using pawn brokers more,” said Katherine Hutt, spokesperson for the Council of Better Business Bureaus. “But it’s critical to know exactly what you are getting into so you are not taken advantage of. Read the contract, ask questions and don’t sign anything you don’t understand.” To be safe, visit bbb.org and click on each business to search for complaints filed against it.