# To Pawn or Not to Pawn, That Could Be the Question

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## I have something I might like to pawn...

If you are ever considering pawning something of value for some instant cash, think twice!

Here is a look at one local Utah pawn shop and how it conducts its business, based on a phone interview.

XYZ Pawn Shop: "Hello, XYZ Pawn." (name changed to shelter the shop)

ME: I may be interested in pawning an item, or two, but I have never used your service. tell me something about how it works.

XYZ Pawn Shop: It's simple. Just bring in the item, and telll us how much money you want.

ME: Will you tell me how much it is worth?

XYZ Pawn Shop: We will examine the item, but we will want to know how much money you want.

ME: So I bring in the item, and say I want \$400, what happens then?

XYZ Pawn Shop: If the item is of sufficient value, we will give you \$400 and charge you 15%.

ME: Then I would leave the item with you, take the \$400 and pay you \$60 to hold the item?

XYZ Pawn Shop: That's right.

ME: If I don't redeem the item on time, what happens to the item?

XYZ Pawn Shop: We then sell the item to another customer who buys it.

ME: If you sell the item for more than \$400, what happens to the surplus.

XYZ Pawn Shop: We keep it.

ME: So, if my item was actually worth \$600, and you sell it to another customer for \$600, I received a net of \$340 and you made \$260?

XYZ Pawn Shop: Yes. That's how it works.

ME: Thanks for letting me know. Have a nice day.

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## What are the alternatives?

That does not mean that I cannot get money for the same item without losing \$260.

Here are some alternatives;

(a) I can make the effort to sell the item myself for its value of \$600.

(b) I can borrow \$400 (the amount I felt I needed) from a so-called "pay day loan" lender. While the interest will still be higher than interest from a credit union or a bank. and this lender will determine what, if any, security they will want for their loan, it is still likely to cost less than 15%, if repaid promptly. So this can be a good solution for an immediate need, with cash usually available on the same day or within 24 hours.

(c) I can borrow from a bank or credit union, depending on my credit rating, for a longer period of time, and something like 10% interest, or less at whatever the current rate is on what is called "a signature loan" often without needing to provide some security for the loan, unless the amount borrowed is an amount larger than the \$400 in this example.

(d) I might borrow from a friend, or a family member with the cost of their loan to be determined by verbal or legal agreement between the two of us, say 5% and the length of time by which it should be repaid to be determined between the two of us.

## One caution...

Every loan, whether commercial or personal, will likely have a due date for when repayment of the loan is to be expected,

In the pawn shop case, the loan is repaid within that time, or the pawned item is forfeited.

In the "pay day", the credit union, or the bank loan cases, the dates for repayment are in written form, and failure to repay on time, can result in additional legal costs and penalties.

If the loan was from a friend, or a family member, any signed agreement can be enforced, and it seems likely that, even without a signed agreement ,the personal relationship would be damaged, if the loan was not repaid on a timely basis.

## The choice is yours...

The choice is your own to make based on how important and urgent having some financial assistance is.

Weigh your choices carefully. Don't get caught up in a scam, and there are lots of those with new scams every day.

There are certainly times when choosing one of these options can turn out to be an advantage. As a grandfather told me, "You make your choice, and pay the piper his due.

The important thing is, make a wise and informed choice you can live with, and not regret.

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