Pawnshops expand their services

Some pawnshops have begun to offer convenient financial services in addition to pawn loans, according to an August 25, 2013 New York Times article. As the number of pawnshops increases, each shop is vying to get more customers and additional financial services are one way of doing so.

Getting customers into the door

The lure of check cashing, wire transfers, prepaid cards and, sometimes, lines of credit services are more than enough to get consumers into the door of the pawnshops.

More customers means more revenue

Pawnshops that attract more customers will undoubtedly conduct more business by issuing more pawn loans and selling and buying items, such as jewelry and electronics. These shops now have two types of income and can make more money with both services. The article mentioned that the National Pawnbrokers Association states that there is a wide range in interest rates on pawn loans—from 2.5% to 25%. The higher the percentage, the more money the pawnbroker will make from the loan. Generally, financial service fees bring in less money than pawn loans.

When are pawn loans the best option?

Pawn loans can be helpful for those who cannot obtain a bank loan or a line of credit due to a poor credit history. This type of loan is based on collateral. That is, if someone decides to pawn a watch, the collateral, then they will have a set amount of time, usually between one and four months, to pay back the loan for that watch with interest. People are able to obtain these pawnshop loans without a great credit record. Even if someone has a credit card, the interest rate on his or her credit card may be higher than the interest rate on a pawn loan, making pawning a preferable option.