Gone are the days of pawnshops as places to unload stolen goods. In many municipalities, pawnshops are required to provide law enforcement with a daily list of all pawned items, along with descriptions including serial numbers (if applicable).

A pawnshop’s primary role is to offer small, short-term loans using merchandise as collateral—though you also can buy and sell items at most pawnshops. The top five categories of pawned items in the country are jewelry, electronics, musical instruments, tools and guns.

The time within which the borrower has to repay a loan is called the hold period—it is set by each state and varies throughout the country, anywhere from 30 days to six months. Interest rates on the loan also are set by each state and generally range from 2% to 25%.

If you don’t pay back the loan and the interest, you lose your collateral, but it does not impact on future loans as it would with an unpaid bank loan—and there are no credit score issues to haunt you.

Source: Eric Modell, executive vice president of Modell Financial, Inc., which has eight pawnshops in Manhattan, Brooklyn and Queens. Modell is on the board of directors of the National Pawnbrokers Association.

(Original publication date: January1, 2011)

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