As our nation’s economy has been declining and struggling to recover for nearly a decade, the finance industry has changed with the times. Payday lending and other short-term financing services are now mainstream funding options for many Americans. Despite the predatory practices and unreasonable interest rates, alternative funding sources are beginning to become the norm – including pawn brokers. Pawning personal items for quick cash is now so common that reality shows like Hardcore Pawn and Pawn Stars and even documentaries like Broke. The Documentary are emerging as slice of life evidence that America’s economy is evolving in the 21st Century. However, all pawn brokers are not ruthless capitalists who prey on the poor, and not all pawn shops are created equal.
Combating the image of shady dealers and miserly lending associated with local pawn brokers, online pawn shops seek to attract upscale clientele who have hit hard times. Offering larger loans (up to $1 million) and the discretion of electronic transaction, online pawn shops seek to change the image of pawn brokerage and offer short-term financing to a market that has the ability to repay or at least valuables that can be resold for sizable profits. Attempting to appeal to a middle-class market that is largely new to the need for such short-term financing options, the best in the business have created a new look and feel to pawn brokerage that could change the way brick-and-mortar pawn shops brand themselves in the future.
The leader of the pack in the online pawn brokerage industry is Pawngo, a company that targets the affluent (or once affluent) who are experiencing financial hardship and have luxury items to use as collateral for short-term loans. From Louis Vuitton bags to Cartier watches to Picasso paintings, valuable personal assets are pawned via the internet, allowing patrons who may be reluctant to visit local pawn shops the opportunity to get the cash they need with the discretion they desire. Typical loans from Pawngo average roughly $1,700, 17 times the $100 pawn-industry average. (1)
Another major benefit to using online pawn shops for short-term financing is that pawn brokers do not report to credit bureaus. If you default on your loan, you simply lose your collateral. So, borrowers who are protective of their credit ratings can use this funding option to achieve their goals without fear of digging themselves deeper into financial ruin.
While online pawning is attractive for a number of reasons, the loans themselves are still non-traditional, and bring with them exorbitant interest rates. At Pawngo, for example, terms are for three to six months, at a maximum of 6 percent interest, but that interest is accrued every month. So, if you keep a $2,500 loan for three months, the interest due is $150 per month, totaling $450 in interest, with the annual percentage rates ranging from 48 to 84 percent, depending on the loan amount. (1, 2) Loan extensions make this figure jump even higher. The loans are still pawn shop quality, just without the social stigma of being spotted hocking the family jewels on the wrong side of town. However, with all things considered, online pawn shops can provide very comfortable loan options and positive pawn experiences for qualified borrowers who need cash fast without risking their credit score or their reputation.
The Debt Help TV website contains more useful information about online pawn shops.