How to Use a Pawnshop

09/27/2011 03:24 pm ET | Updated Oct 11, 2012

The true ABC Loan (Asset Based Collateral)

You may be thinking how strange it is that a 23-year-old is providing you with information pertaining to pawnshops, but very few people have seen the business from my perspective, as a member of one of New York City's pawn shop founding families.

Growing up, I constantly have had to slowly and clearly annunciate that my father is a P-A-W-N broker (not porn!) and define what a pawn transaction is. After working for him for a summer, I realized how interesting the business was, and how I could help make it better. My goal through this blog is to help you better understand it, discuss important issues, and even provide some insight on what I deal with on a daily basis (not your typical 9 to 5!).

To start -- here is my short and sweet explanation -- a pawn is a collateral loan, meaning if you have something of value (most NYC pawnshops focus on gold and electronics) you can exchange it for money for a period of time. During this time, the item is held on to and can be redeemed at any point before the loan period ends.

Often unfairly viewed as a place of last resort, there are a couple of reasons why pawnshops may be favorable for those looking for a short-term loan. The first, and probably most appealing, is that a loan from a pawnshop does not affect your credit. The entire process is also confidential and transparent -- all items are tested for precious metal content, weighed and then assessed through a see-through window (similar to a bank-teller).

Before you head out to the pawnshop, there are a few things you should do. Initially, check out the interest rates of a few different stores and compare their terms (loan periods, pick up reminders and even insurance policies). Most importantly, remember you are dealing with items of value and you should always feel comfortable when making a transaction. Work with companies that are established, licensed and bonded.

If not for a loan, pawnshops are also great browsing opportunities for unique items. For example, on numerous occasions I have gone out to our branch stores and have found Cartier rings mixed in the ring trays, an entire bag made out of 14kt gold out for sale and even a Santana-signed vintage guitar. You really never know what you are going to find, stay tuned!