Some of you may know that I recently became a Pawn Broker. It's not a career path that I would have thought I would choose for myself, but I'm actually enjoying it so far.
I have never pawned anything before, and never really knew how the whole process worked. For those of you that have never pawned anything, I'll briefly explain it.
First, pawning something means taking out a loan on whatever it is one may use as collateral (such as a wedding ring or television). A person comes in with something somewhat valuable, we appraise it at approximately half of what we could sell it for, and loan that amount of money at 240% APR (or 20% per month). (During part of my training, I learned that my wedding ring could be pawned for $35.00. Quite depressing - we paid a considerable amount more for it than that.) If a customer hasn't paid the interest on the loan or called in to get an extension within 90 days, we pull the item and place it up for sale. We do not run credit checks or report unpaid loans to credit agencies.
The first loan that I ever wrote was for $20.00. I tried to keep my mouth from dropping as the person training me started typing away on the computer without so much as blinking. Today, only four days into my job, I wrote a loan for $10.00 without even thinking about it. Loaning out such small amounts happens from the moment we open until the moment we close.
Let me just illustrate how much interest people are paying on these type of loans. If someone borrows $100.00, he or she is paying $20.00 per month in interest. Since the person has 90 days to pay the loan, in order to pick up his or her item would be $160.00. If the person comes in and pays all the interest, he or she can renew the loan for another 90 days. If he or she continues to renew the loan for a full year, it would take a full $240.00 to pick that item up. In fact, it would be cheaper for the customer to just sell us the ring for $100.00, and buy it back for the $200.00 we would sell it for. Crazy, huh?
Here's the thing: The more I loan, the more I get paid. But I can't help but want to tell these people that they are getting themselves caught in a vicious cycle. Can't pay a bill? Pawn a ring. Pay the interest. Eventually get the ring back. Come up short on cash for bills. Pawn the ring again. Pay outrageous interest again. Pick it up again. And on and on and on...It makes me feel terribly guilty (even though the terms are clearly marked on the pawn ticket).
As a side note, one guy came in for a $50.00 loan yesterday in order to pay a bill on time, and came in today to pay it off. You want to know how much he paid in interest for less than 24 hours? Ten bucks.
So I'm probably boring all of you to tears right now, but I had always wondered how this worked so I wanted to pass it on to you. I really am enjoying myself - which is pretty cool.