Are pawnshops rates excessive?
Response: To provide their service, all lenders must charge rates commensurate with the size and duration of the pawn, collateral, risk and recourse. Pawnbroker pawns are small-dollar, short-duration pawns. The item stands as the sole collateral and pawnbrokers are liable for the replacement value if something happens to the item while it is in their care. There are no hidden charges as with other lending institutions. On the other hand, a pawnbroker’s cost basis is far greater. They incur costs for personnel training, appraisal, security, handling, storage, insurance and regulation not incurred by other lenders. Since 15-20 percent of a pawnbroker’s customers elect not to repay their pawns, they are forced to turn their “bad debt” into a retail center to recover their cost. Other lending institutions do not incur retail costs that can include additional floor space, gondolas, counters, personnel, advertising, shop lifters, retail competitive costs, and new merchandise costs to supplem
