Back in the late 1990s, my then-fiancé, Jeff, came to me and told me his best friend and our roommate, “Brad,” had been arrested and was in jail. “Brad is innocent. He got in a fight with his girlfriend and she called the cops on him. I have to help him — he’s my best friend,” Jeff pleaded with me.
This meant I had to help Brad because Jeff certainly didn’t have the money, as he seemed to be chronically under-employed. At the time, I didn’t have the cash, but I did own some jewelry that was worth something. Jeff persuaded me to take my grandmother’s wedding ring to the local pawnshop so we could bail our roommate out of jail.
Reality TV shows like “Pawn Stars” portray pawnshops as magical places to transform the old junk from your attic or basement into big cash. However, these programs mainly showcase people selling their cool and unique items, not pawning them.
Selling is straightforward: The pawnshop owner and the customer agree on a price; the customer hands over the item and the pawnshop pays cash for it. End of story. On the other hand, pawning is a type of emergency loan, in which you take out a loan against the item. The pawnshop lends me cash, and they hold on to the item until I pay them back. However, there are also interest payments involved, which can add up quickly.
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The shop owner lent me $150 for my grandmother’s diamond wedding ring on a pawn. I paid $30 per month in interest. If I missed a payment, the pawnshop would have every right to sell it. If I wanted to get the ring back, I had to repay the original $150, which I never seemed to scrape together.
I ended up paying interest on the pawn loan for 24 months — $720 in total. That’s 480 percent of what I originally borrowed. The pawnshop owner finally took pity on me and returned the ring because I paid on it for so long. And, in case you’re wondering, neither Jeff nor his friend Brad ever paid me back the $150.
Related: My Friend Used Me for Money
I kept the pawn certificate, with all of those interest payments written on it, as a reminder never to do that again. Here’s the lesson I learned: Pawnshops are great places to buy antiques, jewelry and other valuables at a discount. They’re also ideal for selling things you no longer want if you don’t want the hassle of listing them on Craigslist or eBay. But pawning items near and dear to you is costly — both in emotional currency and in real dollars. Don’t use a pawnshop to borrow money. It’s much smarter to save up an emergency fund instead.
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