Pawn shops provide a valuable service to millions of consumers looking for short-term collateral loans. They are a safety net to over 30 million unbanked or underbanked Americans.
Even if you have a good credit score and a solid relationship with your bank, your bank won’t accept items like your late grandmother’s gold ring as security for a short-term loan. When you need cash in a hurry, a pawn loan is often your best or only option.
At Maxferd, we value our customers and always want them to have a positive experience when visiting us. In this article, we share some of the most common mistakes to avoid when pawning your valuables.
4 Mistakes People Make When Pawning an Item
By avoiding the following mistakes, customers can have a better experience when pawning an item as security for a pawn loan.
#1. Not trusting Pawn Shops
There are many myths surrounding pawn shops, such as they are loan sharks, deal in stolen property, want to keep items you pawn, and under-value your items. Although these pawn shop myths have been debunked, many people still choose to believe them.
Pawn shops are one of the most regulated industries. For example, Maxferd has to comply with California’s legislative information – Chapter 2. Pawnbroker Regulations [sections 21200 – 21209]. The fees we’re allowed to charge a client for a collateral loan are set by the State of California.
If you view pawn shops with distrust or suspicion, you may be better off getting a loan from a friend or family member.
#2. Thinking You Can Get More From Pawning Than Selling an Item
Many people are unsure of whether they should sell or pawn an item. Some mistakenly believe they can get more money if they pawn rather than sell their valuables. It’s a misconception that either selling or pawning can get you more money.
As a rule of thumb, if you no longer need or want an item, it makes sense to sell it and put the money to better use. And if you don’t want to lose ownership of your valuables, using them as collateral to get a pawn loan is the way to go.
It’s possible that on rare occasions, pawn shops may pay more for items that are pawned rather than sold. This is typically the case when there is a strong relationship between a customer and a pawn shop, and the pawn shop feels confident they will be repaid.
#3. Negotiating Too Much
Pawn shops are typically open to negotiating prices with customers. However, by trying to negotiate too much, you risk going home without a deal.
Understand the value of your item and that the pawn shop is taking all the risk. Pawn shops, like any normal business, have expenses and have to make money too. They can only assist you up to a point before it becomes infeasible for them.
If you don’t pay your loan, it can take a pawn shop months before they’re able to recoup their money. And if they can’t make a decent return when selling it, they might as well close shop.
#4. Confusing Appraisals With Evaluations
The main reason for getting an appraisal is to establish an item’s approximate replacement cost. It’s mostly done for insurance purposes.
Most pawn shops, including Maxferd, don’t appraise items. Instead, they evaluate items in order to determine their market value or approximate resale value.
The replacement cost of an item can differ dramatically from its resale value.
For example, if you buy a diamond ring for $5,000, your jeweler will usually appraise the ring for $5,000 (or more if you bought it on special). The jeweler next door will never offer you $5,000 or more in cash for the ring should you decide to sell it right away.
The market value or resale value of the ring is the price it would sell for in a competitive auction. It’s the price that a willing buyer is prepared to pay a willing seller. In the case of our example, it would typically be significantly less than $5,000.
Pawn shops are fairly good at determining the value of items, but that doesn’t mean they can pay you market value. Remember that the pawn shop also has to make money.
Based on the above, don’t make the mistake of expecting to sell an item at its appraised value.
That's a Wrap
We trust this article gave you some good ideas on what mistakes to avoid when pawning your valuables.
Maxferd accepts a large range of items as collateral for short-term loans. It includes:
- Broken jewelry
- Fine watches
- Precious metals and coins
- Loose diamonds and precious gemstones
- High-end DSLR cameras and equipment
- Apple products
- Laptops and computers
- Musical instruments
- Certain collectibles
- Luxury handbags
Call us at (800) 888-7296 or visit one of our five locations in Los Angeles and San Francisco to find out how we can help you.