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The Oldest Personal Loan Profession

Posted January 22nd, 2010
by PersonalLoans.org Staff

pawnshopFor more than three thousand years, people have been going into pawn shops to get rid of their old stuff or to get a personal loan in exchange for dropping their stuff off.

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

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