Looking for the right Pawn shop is not an easy task. There are several factors that need to be considered before making a decision which one to choose. But before we start, let us begin by defining what a Pawn shop is. A Pawn shop, also called Pawn broker is a person or business entity engaged in the business of offering secured financial loans to people using an item valuable to them as collateral.
Now that you know what to look out for, the next thing that we will discuss are the factors that need to be considered when shopping for the right Pawn broker.
A. Item Assessment
The process of pawning starts from the time a customer comes to the shop with an item that he wants to pawn or sell. Most items commonly pawned are the following: any type of jewelry, electronic gadgets, collectible items and other objects that are of high value. Assessing an item for its marketability and condition is the job of the appraiser. Just like what we do in our shop, the Metropolitan PawnBrokers, we test an item by examining it for any form of damage such as a scratch or a flaw. The law of supply and demand is another factor that affects the marketability of an item being pawned. The higher the supply of an item in the market, the lower the assessed value. On the other hand, the lower the demand in the market, the higher the assessed value.
B. Loan Amount Determination
In determining the loan amount of the pawned item, there are several factors that the shop owner needs to consider. One of which is the predicted value of the item once it is resold in the market. If we think that a pawned item can be sold at a high price in the future, we can give a bigger loan amount. But if we think that a pawned item’s price in the future will be at the lower range, a smaller loan amount will be offered. Another factor that needs to be considered in determining the loan amount is the paying capability of the customer. If we think that the customer has the ability to pay the interest for only a short period of time and come back to the shop to reclaim the item after repaying the loan in full, the interest will be smaller. But if we think that it will take a longer period of time before the customer will reclaim the item and pay the loan amount in full, the interest will be bigger.
C. Inventory Management
When it comes to managing inventory of a Pawn shop, it is crucial to be very careful to manage the number of items to be accepted as collaterals. Inventory should be exact. Not too little and not too much. An example of a shop that has little inventory is one that usually buys jewels or gold that it quickly resells in the market after the loan period has expired. If that’s the case, this type of shop is less appealing to the customers. On the other hand, an example of a shop that has a huge inventory is one that is filled with items that are of lesser value, thus, harder to resell in the market. The best solution to inventory management lies in the middle that is why in our shop, we make sure that we have a balance of both items that are of greater value such as jewels and gold and items that are of lesser value such as old electronic gadgets and souvenir items.
D. Auxiliary Operations
Although the main source of income of shops involved in the business of pawning is by lending cash loans with interest for customers, there are shops that engage themselves in other money-making activities like the selling of brand-new items that are in demand in the market. But this form of business activity will depend on the location of the shop and what the community’s needs and wants are. Another way that a shop can earn is by trading items in exchange for another. This practice can be done as long as the transaction will turn out to be beneficially profitable for the company.
The four key factors mentioned in this article are the things that you should look for when shopping for the right Pawn shop that can provide you with the solution to your financial problems so choose wisely.