Pawn Shops and Their Negative Effects
A Pawnshop is a location at which, premises or a website where a pawnbroker commonly conducts business. A pawn broker is a person or an enterprise that give secured loans to people. In this case collatel is items of personal property of the borrower. If anything is pawned for a loan, in an agreed contractual period of time, the pawner may purchase back the item for the amount of the loan with an additional agreed-upon amount of interest. The rate of interest, the amount of time, is governed by existing laws or by the pawnbroker’s business policies. At a pawn shop, a person brings withy him/her a piece of property, usually jewelry or electronics. The pawn shop then assigns value to the item and loans the amount of money to the customer.
The client then has a month or whatever agreed period of time to repay the loan, at which time the item will be returned to them upon payment of the amount of loan plus the interest. If a customer decides not to pick up an item, he/she is not penalized and his/ her credit is not harmed. This is to mean that if the amount of loan is not paid (or the period of time extended, if applicable), the pawned property is offered for sale by the pawnbroker or by a secondhand merchant. Contrasting other lenders, the pawnbroker never reports a defaulted loan on the customer’s credit account, since the pawnbroker has the physical possession of the property and may get back the loan value through absolute sale of the property. The pawnbroker/secondhand trader as well sells items that have been sold absolutely by customers to the pawnbroker or to a used items dealer (Alvarez, 2000).
Pawn broking dates back to history. This practice existed in the Ancient Greek and in Roman Empires. Some of the modern western laws on this subject are founded on the roman jurisprudence. Similarly, this model of trade was being practiced in china 3000 years ago, no different from today, all through the ages stringently under the regulations of Imperial or other authorities. Despite the prohibitions of the early Roman Catholic Church in opposition to the charging interest on loans, there is substantiation that the Franciscans were allowed to carry on the practice as assistance to the underprivileged. Pawn broking as a practice introduced into England by William the Conqueror, but identified by the Italian name, Lombard.
Pawn shops have various disadvantages. These include:
It is a risky process; most pawn shops require personal financial details as part of the pawning process. If the records are not secure, personal details could be stolen and one may become a victim of financial offenses such as identity thievery.
Unscrupulous practices: various pawn shops entice people with bad credit to submit property that they duly own, without in actuality putting into consideration the risks involved. They may as well encourage owners to submit their valuables or luxurious electronic items for a small part of their real worth. Pawnshops downgrade a neighborhood and hurt the value of properties. Neighborhood value of properties is impacted negatively by the appearance of a pawnshop.
Pawnshop rates are excessive. In their efforts to offer loan services, these lenders charge rates commensurate with risk, time frame and amount of the loan, collateral offered, and remedy. Their loans are small dollar, short duration, and high risk loans.
Crime; pawn shops lead to an increase in crime. Pawn shops impacts negatively on the quality of life such as home values, issues such as homes security and robberies. In most cases, in communities, pawn shops are a disincentive to people wanting to move into the area. Pawn shops have an inclination for trading in stolen properties and for bringing insalubrious elements to the locality and, less substantially they are an indication to observers of a community in financial suffering, all of which is apparently not good for other businesses. Plus, mostly these shops are a strictly prime downtown location.
Therefore, while pawn shops can help one out in a financial crisis, they are not without risks. However, pawn shops could be advantageous in that:
User friendliness/Easy procedure: The major advantage of pawn shops is that they give hassle-free loans and at a short notice. One can get a loan even with a bad credit.
Lower risks: pawn shops give low-risk loans. If one fails to pay back the loan, the only thing he/she loses is the pawned property. There are no high interest rates or belatedly fees to be troubled about.
Convenience: one can pawn just about anything from handsets to jewelry, depending on the sum needed.
Pawnshops have been in existence for centuries now. The permanent nature of pawning is as a result of the arrangement of the financial structures. There is no credit risk involved because the risk rests with the pawned item: its market worth if it must be sold afterwards, whether it is what it is declared to be and whether it actually belongs to whoever is pawning it. Pawnshop borrowers, who range from princes to peons, have a common characteristic. They lack financial back ups to meet what they consider as pressing, short-term monetary needs. Over the history of pawning, flourishing pawnshop lenders have had two general characteristics. They have good relationship the borrowers and they have the capability to evaluate the value of a pawned item.