Borrow But From Who?
What do you do when you need a money for an unexpected expense when you don’t have some case stashed away in your safe, a bank account, credit card, or a rich uncle?
Loaning money is a very old business. It goes back over two thousand years, to Roman times and ancient China. For centuries, in Europe and the middle east, the church took a negative view of lending money and charging interest for the loan, so they prohibited it. However, as time went by, using personal items as collateral for small loans became because it was a practical way for the poor to borrow during hard times.
Ancient Greece and Rome allowed lending but regulated it. Since many of the emerging European states used Rome as a model for their legal system their churches relented, permitting lending with interest to become part of their economic system. By the 18th and 19th centuries pawnshops became generally accepted, but frowned upon, as part of the financial structure of most countries.
Today, the modern pawn business is a small lending operation that deals in transactions that are secured by tangible assets. They offer people small loans that banks don’t deal with, under conditions set by local and state authorities.
The basics of the business are generally understood. The borrower brings in an item, such as jewelry, watches, rifles, or other valuables and the pawn broker determines how much the item might be worth if the customer defaults. He proposes a loan for a fixed period of time at a fixed interest rate, usually regulated by the state the pawn businesses is located in. The customer can redeem the item at any time by paying off the loan and accrued interest, or he can extend the time available by paying in part. If he does not redeem the item by paying off the loan in a specified period of time, the pawn broker takes ownership and puts the item up for sale.
Pawning is a critical service for people with no bank accounts or credit cards. It is a last chance to avoid a delinquency on a bill. The average loan is $150 but can be higher or lower. The interest rate in regulated and pawn shops and licensed by the state they are located in and they are often lower cost lenders than credit cards companies and pay day lenders.
When you come right down to in, when you need money, pawn shops are a good deal.