What do I need to know before I pawn my stuff?

What do I need to know before I pawn my stuff?
What do I need to know before I pawn my stuff? — Nelvin C. Cepeda/Union-Tribune

Your rent or car payment is due in two days, and you're about $100 short. The amount isn't enough for a bank loan and it's too much to borrow from your newly unemployed best friend. One option that an increasing number of people are using is to get a short-term loan at one of San Diego County's 40-plus pawnshops using your watch, digital camera or other valuable possessions as collateral.

No longer the seedy back-alley stores depicted in old movies, most modern pawnshops are legitimate businesses which offer small loans (usually $80 to $100) and sell second-hand merchandise.

“Pawn businesses are now well-lighted, neat and open. We're not dark and sleazy anymore. Those days are gone,” says Israel Adato, president of the San Diego Pawnbrokers Association and owner of more than a half dozen pawnshops in the San Ysidro area.

The way pawnshops work is simple. You bring in something of value and the broker gives you cash equal to a fraction of what it would sell for. The shop holds the item as collateral. If you pay back the loan plus interest in a certain amount of time, you get the item back. If you don't return for the item in that period, the pawnshop can sell it.

Here are some other things to consider before getting a pawnshop loan.

  • You'll need to identify yourself. Be ready to show a driver's license or state identification, give a thumb print and have your photo taken, along with a photo of your collateral. You'll also need to supply some personal information and details of the item being pawned. This information will be sent to local law enforcement.
  • You don't need a credit check to get a collateral loan. There are no legal consequences if you don't repay the loan; it won't hurt your credit rating or cause you to go into bankruptcy.
  • Your loan time is limited. California law says you have four months (plus a 10-day grace period) to repay your loan, along with interest and ticket-writing fees. If you don't pay off your loan in that time, you either forfeit your collateral or rewrite your loan (pay the interest due and then begin a new contract using that same collateral).
  • Your valued possessions may not be worth as much as you think. Just because you paid $8,000 for a diamond ring five years ago, doesn't mean that's its current market value – especially in a pawn shop. You receive only a percentage – usually between 20 percent and 50 percent – of the value the broker believes the collateral would bring in a sale. Pawnbrokers use online sources such as eBay and Google to determine how much an item is worth.
  • It pays to negotiate and shop your merchandise around. Most pawnbrokers expect customers to try to bargain for a larger loan on their collateral.
  • Pawn interest rates and fees aren't excessive, but they can add up. The interest rates are regulated by the state and vary depending on the size of the loan. If you bring in a watch as collateral for a $100 loan, for example, it will cost you $115.50 to pay off your loan within 90 days. That includes $12.50 (a fee set by the state), a $3 ticket-writing fee (set by the pawnbroker, not to exceed $10), plus the $100 loan amount. If you don't pay off the loan for another month (remember, you have four months), you'll be charged an interest rate of 2.5 percent on the loan and fee amounts for that last month.
  • Read the contract before signing and save your pawn ticket.
  • Look for a reputable pawnshop. The state license and police permit should be posted, says Minerva Ramos, police code compliance supervisor for the San Diego Police Department.
  • Stolen goods are rare at pawn shops. Despite what you may have heard, the industry is tightly regulated by federal and state laws and local law enforcement. Everyday, pawnbrokers must mail information to law enforcement about what is taken into their shop (including customer information). The information is entered into a database which is matched against merchandise reported stolen.

