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When you look at a pawn shop you might wonder to yourself how pawn shops make money. You might think that pawnshops mostly make money from reselling customers’ items if and when a person who took out a loan fails to pay it back. But this could not be further from the truth. Pawn shops actually have a variety of ways that they can make money, and more importantly the instances where someone fails to pay back their loan, and the pawn shop sells away their keepsakes is actually very rare. Pawn shops owners do not go out of their way to sell other people’s belongings (unless they were sold outright to them). It is not great for business to have a reputation of selling items that were put up for collateral as part of a loan, and while it does sometimes have to happen, most pawn shops try their best to work with their customers to get the loan + interest paid back so they can return the items that were used as collateral in the first place. In this article we will cover information on how pawn shops make their money and what you can expect when you work with a pawn shop.
How Often Do Pawn Shops Sell The Items People Use As Collateral For Loans?
There are three reasons a customer will enter a pawn shop. They are either looking to buy an item, sell an item, or get a loan for an item. The pawn loan process is simple, straight forward, and less risky than taking loans that could impact your credit in the future. Pawn brokers provide a loan based on a fraction of the appraised value of the item or items a customer uses as collateral. The loan plus interest needs to be paid back in a set amount of time in order to recover the item that was used as collateral. But what if someone doesn’t pay back their loan on time? Are pawn brokers waiting next to a ticking clock to immediately put collateral items on their shelves. That is not often the case. First and foremost the pawn industry is regulated by federal, state and local laws. Moreover, it is often bad for business. Pawn shops rely on their local reputation and their ability to help their local community secure funds when they need them. Most pawn shops will work with their customers to come up with payment plans that work for them. The main way pawn shops make money from pawn loans is simply in the interest rate. A pawn shop will give someone an amount of cash and request back that cash plus interest. Of course if it is impossible to get back their loan from a customer the pawn shop does eventually have a right and a need to sell the item to recover the funds they spent on the loan.
Pawn Shops Sell New & Used Items
The other way that pawn shops make their money is through classic buying and selling. Many pawn shops distribute new items from electronics to instruments to other retail categories. Just like any other retail store they order items from a manufacturer or brand and then stock their selves. Additionally, pawn shops are often a place where local customers can sell their used items easily and quickly. If you own jewelry, watches, or other items that you want to sell outright you might not want to go through the long process of finding a prospective buyer and potentially getting ripped off. Pawn shops remove that risk. Pawn shops can accurately appraise jewelry and other items, buy the items for what they are worth. Pawn shops then sell those items at a slight markup in order to make a profit on the resale. Basically the pawn shop is providing an essential hub for selling and buying used items. Sellers can get cash and get rid of items quickly, and buyers know where to go when they are looking for used items. Buying used tends to be less expensive than buying new items, and again pawn shops know the exact value of an item. There is less of a chance of getting ripped off when both buyers and sellers work through pawn shops because pawn shops have a vested interest in understanding the exact values of the items they have on hand.
Pawn Shops in The Bronx NYC
Paradise Pawn has two pawn shop locations in the Bronx. If you are interested in learning more about buying, selling or pawning items in NYC, please give us a call or click below for more information.
