Pawn Shops

Describe this type of credit:

A store which offers loans in exchange for personal property as equivalent collateral. If the loan is repaid in the contractually agreed time frame, the collateral may be repurchased at its initial price plus interest. If the loan cannot be repaid on time, the collateral may be liquidated by the pawn shop through a pawnbroker or secondhand dealer through sales to costumers.

How are interest rates and fees calculated?

In most states the interest rates are regulated to fairly low levels (between 1-5% per month). In other states, they are regulated a much higher levels (25%+) or not at all.

What is the average APR and/or fees paired?

Even though you borrow money for only a few months, paying an average of 10% a month interest means that you are paying an annual interest rate of 120%. Interest rates may vary from 12% to 240% or more, depending on whether state law restricts rates pawn shops can charge. You might also be charged storage costs and insurance fees.

What are the source(s) of this type of credit?

Pawn Loans.

Provide in an example of a company in your community or media that provides this credit?

The T.V show Pawn Stars.

When might a consumer seek this type of credit?

Whenever he or she has an item they don't use but has somewhat of a value they can pawn it if they are in the need of a little bit of money.

What two advantages of this credit?

They allow for a person to get money very easily and quickly. The person that loans you the money at the pawn shop would be giving you full price on what the item is worth and then they will keep the item until you pay back the full price of the item.

What are two disadvantages of this credit?

A disadvantage would be you have the risk of losing the item you pawned, therefore you would still have to pay back full price of what you loaned. Also if you don't pay back in a certain amount of time the pawnbroker can sell the item and make profit off of that particular item.

What are three alternatives consumers should consider before using this credit?

Wait and save money is one, another is go to a local bank and get a loan for whatever you may need, and the last would be considering selling the item so they don't have to worry about fees.