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Know About the History and Working of Pawn Shops

Anamika Kumari
Pawnbroking has been a trade practiced since ancient times. The modern-day market is flooded with a myriad of pawn shops. We trace the history of the trade here, and take a peek at the interior functioning system of these shops.

Pop! Goes the weasel.

A traditional English nursery rhyme, 'Pop! Goes the weasel', written back in the 18th century, was very popular once. One of its alternative interpretations involved references to pawning. 'Pop' was the slang used for 'pawn' and 'weasel' was the slang used for 'coat'. The line, therefore, meant "trading one's coat for daily bread."

★ History of Pawnbroking

The word 'pawn' comes from an ancient word 'pannum' (Latin for cloth). According to the sources, pawn practice in the medieval period involved cloth as the collateral because that was the most valued object for a majority of them.
◆ The Chinese provide the earliest records of pawning as a business practice dating back to 206 BCE during the era of the Han Dynasty. Buddhist monasteries called changshengku, meaning long-life treasuries, was the nomenclature used for the business.
The generous Chinese moneylenders would accept a collateral item for which the seeker of the loan may get some credit that they could return in the next three years.
◆ The medieval period saw the dawn of pawn shops in Europe. The business flourished and gained popularity in a short time. The Lombards and the Medicis of Italy were considered the most influential moneylending institutions of their time. 'Lombard', for that matter, was the second name to the business of pawnbroking.
Such was their influence, that the three discs representing gold coins, which featured on the coat of arms of these families, was eventually modified and recognized by all as the universal representation of pawnbroking. The modified symbol takes the discs to the third dimension, and the resultant symbol comprises three golden spheres hanging from a shaft.
◆ Famous instances from the past hold evidences that pawning one's possession was popular with both the masses and the classes.
Pope Leo X had once pawned his silver and palatial furniture to keep up with his extravagant spending, while it was in England that Kind Edward III kept his jewels as the collateral with the Lombards in order to fund the English military during the Hundred Years' War against France.
The Spanish queen Isabella is known to have hocked her jewelry to meet the expenses of Christopher Columbus' voyage to discover the continent of America.
◆ In context to the classes, the earliest pawn shops claimed to benefit the poor. The Bible opposed charging of any interest by the Christians from their fellow countrymen but somehow favored debting the foreigners. Also, it allowed using one's own child as a collateral.
◆ The 16th century saw the decline in the goodwill of the pawn shops as they were accused of selling stolen articles. It was then when England started regulating the operation of these shops and constructed a system of 'Charitable Corporation' in the 1700s in order to "lend money at legal interest to the poor upon small pledges."
The shops under this corporation provided loan on a low rate of interest and took great care to limit the pawning of stolen articles. In case a pawnbroker had traded in good faith with its customer and was later accused of being in possession of a stolen item, there was The Pawnbrokers Act of 1872 to rule out any legal action upon him.
These guidelines served a number of purposes protecting the rights of shop owners as well as the interests of the customers. It was the deep-seated corruption in the inner circle of the corporation that rendered it bankrupt after 25 years of its existence.
◆ It was during the Great Depression in the wake of World War II that banking institutions approved by the state collapsed. Pawn shops were the only option left where survivors of the war could turn to with their belongings in favor of a loan.

★ How does pawnbroking work?

◆ The working of a pawn shop is simple. The loan applicant takes anything that is worth credit and is of a resale value to the pawnbroker.
◆ The pawnbroker offers to lend an amount that is up to one-third the value of the item. This limit may vary for certain goods that might be easily available at cheaper rates in the market. In such a case, a smaller amount of currency is what the applicant can ask for.
◆ The money lent is charged at an interest suggested by the broker for a period of time within which both the principal amount and the interest is to be returned.
◆ After having paid for the credit, the loan applicant may 'redeem' what is rightfully his. The applicant has to agree upon the complete authority of the pawnbroker over the collateral if he or she fails to pay back the amount in the allocated period of time.
Under such conditions, the pawnbroker may sell the item to others for a bargain. He holds the right to modify the item before sale.
◆ The pawnbrokers get their payback from the interest and handling charges. The interest rates generally range from 4-8% per month, and the handling charges vary from object to object. Sometimes, the merchandise gained by the shop owners that actually reach the 'shelf', are sold for a fat margin of bargain.
It can be easily noticed that starting off a pawn shop needs initial investment, and there is a little guarantee of profit. With high risk quotients involved, it is still discussed amongst the earliest known business practices all around the world. This points out to the never-dying need among all to gain easy access to some quick cash.

★ Evaluation of items

◆ The merchandise that is provided as the collateral requires an apropos amount of evaluation. This is done by performing an elementary check for any abrasions, missing parts, and the functioning of the item being pledged.

◆ Precautionary checks are made to ensure that it has not been stolen and is legally a property of the loan seeker.
◆ However, in the absence of enough proof, most pawnbrokers risk their credentials by trading in good faith. For a fair and accurate evaluation, the pawnbrokers need to keep themselves updated with articles around the world. The crucial decision lies whether there will ever be any demand for the article being offered.
◆ He also needs to consider the probability that the loan will be settled by his customer.

★ Shelving and reselling

The next step is assorting the items categorically and placing them safely in case the owner demands redemption. For this, not only appropriate care but also caretakers are required.
◆ A pawn shop owner has to ensure that the articles for sale are visible on shelf for its prospective buyers and are not being shoplifted at the same time.
◆ Some of these can also require regular maintenance or cleaning in order to maintain its working conditions. Apart from these, repair of broken articles and replacement of any missing part is also to be done before it goes on the shelf.
◆ These shop owners advertise themselves through local hoardings. With the rise in inclination towards online shopping, pawnbrokers have found an efficient way to reach out to customers far and wide, and obtain the best price for it without having to hassle over the price. Such stores provide links to their websites over the Internet.

★ Modern aspect of pawnbroking

Pawnbroking has not changed much over the times, and it still remains pretty much the same.

◆ The present-day pawn shops remain to be the only hope of moneylending for a considerable population of the US, who do not hold a bank account or have an access to banking services.
◆ Pawn shops are the immediate hope for the needy to get quick loans in return for small collaterals for which the banks refuse to loan commitments. They have grown over the years of criticism for harassing the poor and his limited resources, and proved to be a practicable monetary solution for them.
◆ Certain organizations such as the National Pawnbrokers Association have been formed to monitor transparency in the operation of pawn shops and regulate quality in the business.
◆ A famous reality TV series, 'Pawn Stars' was aired on the History Channel. It was based upon the daily happenings of 'World Famous Gold & Silver Pawn Shop'. Its sequel 'Cajun Pawn Stars' featured the Silver Dollar Pawn and Jewelry Center in Alexandria, Louisiana. This gave the audience a practical insight into how the modern pawnbrokers function.
There is another aspect of pawnbroking altogether that is set apart from the entire banking business. It favors the interests of those who possess a keen eye for antiques.
These antiquities reach a pawnbroker's shelf due to various reasons such as the owner's ignorance in regard to its true nature or a simple object that gained value later. Also, these are the shops where one may get unique merchandise of their interest for lower rates as compared to the other stores.