Need Cash? Pawn Something.

Apr 13, 2020 by

pawn shop sign

Better than a payday lender.

Pawnshop: I’ve likely just conjured in you these feelings and images: Desperate people, stolen property, addicts, the low-income section of your community, shady characters. If so, you suffer from “pawn shop stereotyping, my friend. If you have no emergency fund, in my book you have been, are, and likely will again fit the “desperate” piece of this stereotype. So don’t rule out pawnshops—there are worse ways to get cash in a crunch!

How Pawn Shops Work

If you own something of value that’s apt to sell readily, you can convert it to cash at a pawnshop.

Let’s say you own a flat screen television but you need money instead. The guy who runs the pawn shop—the pawn broker—knows from experience how quickly and at what price your TV is likely to be bought by the customers who frequent his shop. With this knowledge, he’ll make you a cash offer for your TV, building in his desired profit margin. Let’s say he offers you $75. Haggling is part of the adventure; don’t be afraid to make an argument for more and a counteroffer.

Initially, the pawnbroker isn’t actually buying your TV; he’s lending you money, and the TV is his collateral. He’ll give you a pawn ticket to document the loan, and you leave with seventy-five bucks.

Your Options After Pawning Something

You’ve got $75 and the pawnbroker has your fancy television. Now you’ve got a few options:

  1. Forget about the TV and keep the $75. Think twice and set up an emergency fund before you buy another TV.
  2. Return to the pawnshop before your TV is put on the display floor and offered for sale (typically after 30 days) and buy it back. Of course it’s going to cost you more than $75. (That’s business—it’s not personal!) Factoring in pawnshop fees and interest, you might have to pay $90 to get your TV back.
  3. Return to the pawnshop before your TV is put on display and offered for sale and pay the monthly fee—$15 in this example—to give yourself another 30 days to try to come up with the $90 needed to buy back your TV.

Worse Choices Than Pawning

So what’s a $15 fee for loaning $75 for 30 days work out to? About 240% annual interest. Ouch. But when you don’t have an emergency fund, you may not have a good, cheap option for meeting an urgent need for cash. For example, these choices would cost you more than pawning something you own:

  • Get a payday loan. APRs typically range from 400-600%.
  • Take out a bank advance direct deposit loan. These relatively new products are your friendly neighborhood bank’s entry into the lucrative payday lending business, and they’re equally costly.
  • Get a credit card cash advance. On top of a higher (compared to purchases) interest rate that applies immediately, not just if you let the balance ride as with purchases, you’ll get zapped with a fee often ranging from 3-5%. You’ll make your card issuer’s favored customer list!

The Moral of This Story

If you cringe mightily at the thought of pawning something and all the other options mentioned here for meeting a cash crunch, that’s good! Now you’ve got inspiration to get to work on establishing an emergency fund. Until that’s done, if you need cash, you may have no good options.

What About Pawnshops?

Have you ever pawned something? How did it work out? Or have you ever taken advantage of the great prices you can often find at a pawnshop?

10 Comments

  1. Daisy @ add vodka

    I’ve never pawned anything but I have bought things at a pawn shop – It’s a good way to save money although sometimes they can’t really be trusted.

  2. I’ve never pawned anything or bought anything at a pawn shop but I’ve been looking at the ones that are near me.  I know my parents did when I was younger but I don’t remember too much about it. 

  3. frugalportland

    I’ve never even been inside a pawn shop, but now I’m intrigued~!

  4. I’ve pawned stuff a couple of times.  The last time was about 10 years ago and I never did buy my stuff back.  They gave me almost as much as I could have sold the stuff for, so it wasn’t a bad deal. I hope I won’t need to pawn stuff again though.

  5. I’ve both purchased and traded at a pawn shop, but never actually pawned an item.  Some pawn shops are reasonable sources for power tools brands such as DeWalt.

  6. I have been considering using a pawnshop lately, for a guitar that i have been having trouble selling on craigslist.. im sure i wont get what i am looking for, however.. but it is still an option

    jefferson

  7. I had to pawn my car stereo once, never will I go there again. Ebay is my friend hehe

  8. I think you’ve made the pawnshop experience much more simplified and easy to understand. I especially like your suggestion about using the money we’ve gotten from the pawnshop to set up an emergency fund for future use. My husband’s friend was needing a bit of cash recently to pay off his credit card debts. I will suggest to him about using pawn shop loans to get some quick cash to tide him off for now.

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