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| *The Commerce Journal>>>Personal Finance |
How do pawnshops make profits? |
How do pawnshops make profits? They make profit on the interest they charge when someone borrows money from them. They also make money when they sell any of the goods. Pawnshops often charge several percent interest per week, sometimes more than a bank would charge for a year. They also keep some level of collateral, which they will sell if the customer is delinquent in their loan payments. It is not unusual for a pawn shop to also deal in low to mid grade jewelry, guns, etc, which can augment the usual pawn income. By Low - Sell Higher Charging High Interest On Loans well a rich dude becomes a drug addict then he has no munny and he goes to the porn shop and says hey i need a loan and the shop dude goes how much the drug addict goes 10,000 then the shop dude says what will you leave for insurance the drug addict goes my porsche the shop dude goes ok then the drug addict buys drugs and cant pay th loan back and the shop dude sells porsche for 50,000 and makes 40,000 profit If you're getting rid of an item, the pawnshop will look up the value or a rough estimate of the value. Then, they will offer a set percentage of that value. They normally have a gap of 3-5% on their offer. For example, I wanted to sell some subwoofers that cost $400. The pawnshop could probably get close to $300 since they're used but fairly new. They would offer about $125. I say No. They offer about $140. There's a little more than 5% gap but the idea is still there. Now, if I sold the subwoofers at $140, they could sell them for $250 and still make $110 profit. They do this with EVERYTHING that comes to them. Loans are the same thing but they offer more so they can add more with the interest. Hope this helps. They make money by charging usuary fees (fees that are illegal in all other contracts but not in a contract for a pawn). They charge 200 to 300% of what they loan you on your things, if you don't pick them up they sell them at a profit. That $200 ring you pawned last week netted you about $20.00 and you were charge $50.00 or $60.00 to pick up the ring in 30 days time or it would go on the market for at least $100.00. |
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