Pawn Shops Go Mainstream

Pawn shops have become respectable. Not so long ago, they were considered a haven only for drug dealers, thieves, and the chronically poor. But in case you haven't noticed, the pawn industry has given itself a makeover.

Pawn shops are now the backdrop for reality television series like Pawn Stars on the History channel and truTV's Hardcore Pawn. Online, upscale pawn shops with names like,, and are chasing affluent individuals and families that don't need money immediately but want a more sizable loan to help their cash flow; these Web-based businesses are also betting that some middle- and upper-class customers will find it more appealing to pawn items in the privacy of their own home instead of driving to a seedy neighborhood. And there's even a chain of pawn shops--Money Mizer Pawn & Jewelry, with seven locations throughout Georgia, Alabama, and Florida. By the end of 2014, the company expects to have 16 to 18 stores open and operating.

Still, no makeover can change the fact that pawn shops are still what they've always been: a pit stop on the road of despair and desperation. Nobody goes to a pawn shop after they win the lottery.

"It was rather demoralizing initially, but I got over it," says Cynthia MacGregor, 69, a freelance writer and editor in Palm Springs, Fla., who found herself, for the first time, falling victim in the aftermath of the recession and pawning her mother's diamond ring last year. "I guess I never lost the part of my upper-middle-class upbringing that looked down at pawn shops."

The stereotype that if you visit a pawn shop, you're somehow in league with the dregs of humanity, is pretty much over. But a loan is a loan, and it's a serious business, so if you're considering pawning an item, here's what would be helpful to know.

What to expect. You probably have some understanding of how the process works: You select an item you own that you know has some value, and then, assuming you aren't doing this online, you head to your local pawn shop to try and get a loan based on the worth of your possession.

[Read: How Safe Is Your Safe Money?]

"You walk in with your item, you negotiate a price, and once you finalize the price, you have to produce your identification, and after that, we'll fingerprint you," says Les Gold, the owner of American Jewelry and Loan, a pawn store with two locations in Detroit and Pontiac, Mich., and one of the stars of Hardcore Pawn.

"We fingerprint everyone for everything that comes in, and then we forward that information to the police as every pawn broker does, to make sure we aren't dealing with stolen property," continues Gold, who says this is how it generally works in every pawn shop in America. "You're issued a ticket and you get your money, and you leave. The whole process can take three or four minutes."

Online pawn stores. They're a good fit if you want a larger loan--for example, a few thousand dollars--and if you don't need money today. For instance, offers loans from $500 to $1 million. A customer settles on what they want to pawn, answers a few questions on the website, and then an initial estimated offer is made. If the customer accepts, he or she can print out a prepaid FedEx label to send in the item, or have a package with a prepaid label sent to his or her home. The evaluators at Pawngo receive the item, look it over, and if it's accepted (they need to make sure your gold watch isn't a fake), they'll send you your money within 24 hours.

"[With] our typical customer, something has triggered a cash-flow problem in the household ... They aren't living paycheck to paycheck," says Todd Hills, CEO of, headquartered in Denver. He says the Internet is ideal for his clientele because pawn makeover or not, "in certain parts of the country, pawn shops can be a little intimidating to walk in."

How the loan works. You have to pay the loan amount back, plus fees--usually interest and a storage fee--by your deadline, which is typically a month or several. If you don't pay it back by then, the pawn shop has the right to sell your item. But pawn shops are often happy to extend the loan, since that is, of course, a big part of how they make money. According to the National Pawnbrokers Association, 80 percent of all customers do end up reclaiming their items.

Finance charges. Interest rates can range from 3 to 25 percent of the cost of the loan, depending on the state. In Michigan, where Gold's shops are located, the interest rate is 3 percent, and consumers are also charged $1 per month in storage fees. So if you took out a $100 loan, over three months, you'd pay $9 in interest and $3 in storage fees, says Gold.

How much money you'll likely get. Maybe not as much as you think. Gold says pawn stores will typically pay 60 percent of what the person paid for the item. So if you have a baseball collection that is determined to be worth $500, you'll probably get $300 for it.

"If we gave more than that amount, they'd have to reason to come back and get it," says Gold. "Most of the people we give loans to come back and get their item."

[Read: If What You're Buying Is Counterfeit, It Isn't a Good Deal.]

In a worst-case scenario, of course, you could lose your item, or if it's extremely sentimental and valuable to you, you could wind up extending the loan and paying fees indefinitely to the point where you would have better off doing almost anything else. So here's some common-sense advice: Anything you pawn should be something you may not want to lose but won't be emotionally devastated if you do.

Meanwhile, if you're told something isn't worth what you know it is, you can do a little pushback. When MacGregor felt she received a low-ball offer on a loan based on what her mother's diamond ring was worth, she insisted it was worth more. The pawn shop had the ring examined by a jeweler to ensure it was a real diamond, and she was offered more--$350, which the pawn store said was the absolute most it could offer.

MacGregor took it and was able to pay the loan and get her ring back. She later had to pawn the ring again, but says business has picked up and she doesn't envision having to do it again.

[See 16 Things You Should Never Buy New.]

Pawn shops aren't interested in sob stories. It sounds harsh, but that's the reality, says Gold, who explains: "We can't give you more money because it belonged to your grandmother, or this is something that your mom gave you before she passed away."

Gold says pawn brokers are sympathetic to the fact that the power tools or diamond broach you're parting with might have sentimental value, but that sympathy won't translate into more dollars. For the pawn broker, who has to offer a loan low enough to be able to sell the item for a profit in case the loan isn't repaid, there's no intrinsic value in hearing your tough-luck tale.

"You can't sell a story," Gold says.

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