It's not hard to reason this one but you migh...
If you’ve watched enough Hollywood movies, chances are you already have a vague knowledge about the subject of pawning but here’s some further insight. The concept is simple: a client goes to a pawn broker to borrow money, and leaves an item with the broker as collateral for the loan. The client has a certain amount of time to repay the loan, with interest of course (and take back his item), failing which the broker is free to sell off the item and recover the loan amount.
Naturally, the pawn shop ensures that the loan amount is always less than the value of the item; this ensures that they usually make money whether the lender returns to reclaim his item or not. For buyers, pawn shops represent an interesting place to pick up an eclectic range of items, often at cut-rate prices.
For example, if you own a flatscreen TV that you bought for Rs. 1,00,000 and need some urgent cash for say, 2 weeks, you take it to the pawn shop. The broker will appraise your TV as having a second-hand value of say, Rs. 70,000 and offer you a loan of upto Rs. 50,000 on the TV for a 3 month period. You now have two options: repay the loan within 90 days, or forget about it and forego any claim to your TV.
If you return to repay the loan, you'll end up paying interest and can get your TV back. If not, the pawn shop will put your TV on the market for Rs. 70,000 and recoup the amount it loaned you as well as a healthy profit.
Pawn shops have earned a seedy reputation over the years for taking advantage of the desperate by offering them loans at predatory lending rates and also receiving and dealing in stolen or counterfeit merchandise. In fact, pawn shops assume all the risk when the receive an item; if something is identified as stolen, they must hand it over to the police or original owner. Pawn brokers argue that they perform a valuable service for customers without bank accounts or needing short-term loans.
The most universally accepted symbol for these brokers is three spheres suspended from a bar, which has a symbolic meaning dating back hundreds of years to Lombard, Italy. Pawn shops are popular all over the world; however, in India, pawn brokers mostly deal with jewelry, gold bullion, and other high-value items.
-Pictures courtesy Thinkstock-
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