TV shows like Pawn Stars make it seem like pawn shops are all fun and games. However, most of what these programs show are people selling their cool and unique items. What’s the difference between pawning and selling?
Selling is straightforward: we agree on a price, I give the item to the pawn shop and they pay me cash for it. End of story. Pawning is essentially getting a loan against the item. The pawn shop gives me cash and they hold onto the item until I pay them back. However, there’s also interest payments involved. The best way to explain it is to tell you MY story about pawning my grandmother’s ring.
I desperately needed money, so I took one of my grandmother’s rings to the pawn shop. They gave me $150 for it on a pawn. I had to pay $30/ month interest. If I didn’t, the pawn shop would have every right to sell it. If I wanted to get it back, I had to repay the original $150, which I never could come up with. I ended up paying interest on it for 24 months, $720 in total. That’s 480% of what I originally borrowed! The pawn shop owner finally took pity on me and gave me back the ring, because I paid on it so long.
Lesson learned: Pawn shops are a great place to sell things you don’t want. But pawning items that are near and dear to you is costly – both in emotional currency and in real dollars! So please learn from my mistake and don’t use a pawn shop to borrow money. It’s much smarter to have an emergency fund.
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