The Risks of Utilizing a Pawn Shop

If you have old records, video games, musical instruments, or other items that you think are worth something and you need cash, you might be tempted to go to a pawn shop. Before you ask “Where can I find a pawn shop near me?” You should ask yourself, “Is this the best alternative for me?” Here’s what you need to know about utilizing a pawn shop and the risks involved.

Are Pawn Shops Dangerous?

In general, pawn shops are dangerous. You may want to be careful around a pawn shop, because it’s usually clear that this is a business that has a lot of cash on hand and many valuable items. That said, most pawn shops also have good security for just this reason. You have nothing to fear from the proprietors of the pawn shop, as this is an honest business.

How Do Pawn Shops Work?

So what percentage does a pawn shop give you relative to the value of your item? If you’re asking this, you’re asking the wrong question and probably have a misconception about how pawn shops work. Pawn shops are not in the business of buying and selling merchandise — they’re in the business of giving out loans with interest. Your merchandise is simply the collateral that secures the loan.

How a pawn shop works is this. You go to the pawn shop and tell them how much money you need to borrow. You present your item. The pawn shop then decides if they can sell your item to recover the amount of the loan should you default. If they think they can, they will offer you terms.

You’ll be required to pay back the loan over the term offered plus interest. If you do not, and you do not work out a way to extend the term, they’re free to try to sell your item to try to get their money back, even if you’ve already paid them some money as part of the agreement. This is also why the only items you can buy in a pawn shop are items for which the original owner has already defaulted.

What Are the Risks of Using a Pawn Shop?

There are only two serious risks to using a pawn shop. The first is that you default on your loan and lose your item. If you don’t mind losing your item, the second risk is that you don’t get good value for the item you gave up in order to default on your loan.

If you’re just looking to sell an item for cash or for an item of equal value, you’ll be much better off going to a buy-sell-trade store like Record Head. At Record Head, you can get paid based on the actual value of your item, and you can even trade it for something else in the store by selling your item for store credit. You can also buy whatever you see in the store if you are so inclined.

For more information on how a Buy-Sell-Trade store works, visit Record Head today.