A pawnbroker provides loans to individuals using personal property as collateral. Pawnbrokers charge interest rates on these loans which vary by state. While pawnshop loans average around 200% APR, other types of loans can exceed 400% APR.
Requirements for Operating a Pawnshop
To operate, a pawnbroker must have a business plan, procedures, and licensing. Licenses needed may include general business licenses, business name registration, consumer credit license, and state and local pawn shop licenses. Opening a pawnshop requires fees for registration, licensing, location, security, etc. The minimum is $10,000.
Profit Margins and Loan Process
Pawnshops make money through interest on loans and profits from selling unredeemed collateral. They aim for 15-25% profit margins. Loans are made quickly, requiring only ID and collateral the pawnbroker deems valuable. Loan amounts depend on the collateral’s value, averaging $150.
Authentication in Pawn Shops
How do pawn shops authenticate?