According to the History Channel and it’s Pawn Stars program, there are currently somewhere over 12,000 pawn shops operating in the United States. (On a side note, if you’re considering taking out a personal loan by taking something to a pawn shop, you might consider watching this program. It’s very informative about the inner workings of how pawn shops do business.)

At any rate, if you are considering going to a pawn shop for a personal loan, here are some factors you need to consider:

• Pawn shop loans are fast and don’t require a credit check. If you have crappy credit and are desperate for the cash, it might be worth considering.
• Pawn shops won’t give you full credit for pawning your item. Let’s suppose your favorite necklace has a certified value of $1000. You’re going to be lucky to get $500 from the pawn shop for it. The loan will never be for what the item’s worth. It helps if you have an appraisal to help you argue your case, but the pawn shop wouldn’t be able to stay in business if they gave out full retail value.
• Pawn shop loans have high interest rates. In some cases, these rates are going to be as high as they would for payday loans. Some states have limits on how much you can be charged, so make sure you know what the rules are in your state.
• You have to pay to get your stuff back. In addition to interest and the principal, you might have to pay storage fees or insurance fees. If you don’t pay it in time, you are going to forfeit the item.
• You have to give a lot of personal information to get a pawn shop personal loan. Be ready to bring your driver’s license or state ID, as well as one or two other pieces of identification.

Photo via Colin Gregory Palmer

That’s right. Three millenia. Pawn shops have been around longer than Christianity. When the Roman Empire was just a flicker in the eye of history, pawn shops had been booming business for generations.

It all started back in ancient China. There’s even a pawn shop museum in Macau that traces the history of this kind of business.

Pawn shops were big business in the cities in the years leading up to the Great Depression. During the Great Depression and afterwards, business declined. No one was loaning any money to anyone. Even loan sharks dried up until after World War II.

In the 1970s, however, the personal loan business came back strong. It may have partially been due to the recession of the Carter era, as people tried to find ways to get money to pay for gas and other necessities.

Today, there are thousands of pawn shops around the country. A 2004 estimate put the number at 14,000 and growing. There are even several national pawn brokers, including EZ Pawn and Cash America, that have stores in nearly all of the states in the U.S.

Some pawn shops today have put a new twist on the personal loan aspect of things, however. Rather than offering a personal loan with a high (but ultimately reasonable) interest rate in exchange for collateral, these businesses are ditching personal loans altogether.

Instead, they’re integrating with payday lenders. Payday lenders offer money to borrowers without asking any collateral. The loans are for a short term – usually two weeks – and come at an interst rate that’s measured in the hundreds.

Today if you walk into a pawn shop, don’t expect to drop off a ring and get a personal loan for it. You can sell the ring if you want, or you can take a payday loan, but you probably can’t do both.

Is this good or bad? It’s hard to say. Some states are making it hard if not impossible for payday lenders to operate, so in many of these states some pawn shops still offer more traditional personal loans. Still, it remains to be seen whether these kinds of restrictions on payday lenders will continue, or whether things will loosen back up.

Photo via taberandrew