People turning to pawn shops for cash

July 29, 2009 7:52:08 PM PDT
With banks tightening, and credit and jobs hard to come by, more and more people are turning to one of the oldest ways of getting quick cash.

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Business is brisk these days at the Pacific Loan and Jewelry shop in San Francisco. While the economy sinks, business there rises. Like pawn shops all over the country, Pacific Loan is getting up to 30 percent more business than last year. It is writing up to 120 loans each and every day, more than the average bank branch.

"People are coming in telling us that they've lost their jobs and they're having hard times. The pawn shop is a source of income, a loan without having to go to a bank," explained Paula Newhouse at Pacific Loan and Jewelry.

"If people get down to their last source of financing they turn to the pawnshop. It's an industry that is as old as prostitution itself," added Michael Krasow.

The same is true at Maxferd Jewelry and Loan in San Francisco. The cases are filled with precious rings, watches and bracelets. Among the pieces is one diamond and gold Rolex, a sign that someone was doing pretty well, until now.

"We're seeing a lot of customers coming in who are not able to pay their mortgages. We're getting a lot of new customers who are needing a lot more money," said employee Josh Litz.

With banks often slow to modify mortgages, quick to lower credit limits and quicker yet to raise credit-card rates, a pawn shop can suddenly look like the best option.

"People aren't getting credit like they used to, so they're having to come to a pawn shop for credit. It's third-world financing," Krasow said.

The loan can be any amount up to the estimated value of the pawned item. Customers have to pay back the loan to get the item back, plus interest. Pawnbrokers say more people these days are simply selling their items so they do not have more debt. Someone recently pawned a 5.8 karat, princess-cut, diamond wedding ring. The shop put a $25,000 price tag on it.

"Right now the most unusual item we have is a bottle of Petruse wine that at one time had a value of over $5,000," said Krasow.

They also have a guitar autographed by Paul McCartney and a Raiders helmet signed by the all-time greats. For some, items like DVDs and guitars are equally precious.

ABC7 was there when one customer reluctantly put his amplifier in hock to get a $50 loan.

"Short cash for a short time but it works well for all parties involved," he said.

"They're more grateful that we're here lending them money when nobody else will lend them money," Krasow said.

Interest rates for pawn shops are regulated and limited by the state.

LINK: Official pawnbroker regulations

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