Hawaii's Pawn Stars
Pawnshops are a nearly recession-proof businesses. We decided to find out more about the way pawnshops work, and what’s behind the counter in Honolulu’s best-known outlets.
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The simple answer, according to Liliha Pawn owner Dale Ichishita is: “They need the money. Immediately.” And, other than the “We Buy Gold” kiosks popping up all over Honolulu these days, pawnshops are the only places you can walk into with just about anything of value and walk out with cold, hard cash. Try getting $20 for a mini electric guitar at American Savings Bank and see what happens.
I wanted to find some big-shot, million-dollar portfolio financial adviser to explain where pawnshops fit into the overall national economy but I think I can field this myself: They fit in at the bottom. Pawnshops generally cater to people on the lower rungs of the economy, people without steady jobs, credit cards, checking accounts or million-dollar portfolios. They don’t use Craig’s List to sell their stuff at a better price because many of them don’t know what Craig’s List is. Or they don’t have a computer. Or they just don’t have the time. I use Craig’s List all the time and it usually takes at least a week for something to sell, if it sells at all. My mini electric guitar ad didn’t get one response. Selling things on eBay is even more complicated, because you get into setting up Pay Pal or credit card accounts, uploading photos, writing copy and dealing with the post office.
John Spiker noted that pawnshops offer another financial advantage. Pawning something is nothing more than getting what he calls a “non-recourse loan.” In other words, the transaction is what it is and there is no recourse as a result of not reclaiming your pawned merchandise. If you don’t reclaim it, it’s simply gone. Unlike when you default on a traditional loan, you don’t get a bad credit report, your credit card fees don’t go up and you don’t pay any late fees.
Another traditional rap against pawnbrokers is that they charge an interest rate that is too high for people who can’t secure a traditional loan. The rate is about 20 percent, according to Fran Peoples, which means if I had pawned my guitar for $20, I would have had to pay $24 to get it back. That doesn’t sound like such a bad deal to me. Especially when I think that by the time I pay off my $435,000 home loan (and home equity line of credit) in 30 years I’ll have actually paid $1.45 million. I’m not sure where that money’s going to come from, but I noticed a couple of nice Hawaiian gold bracelets in my wife’s jewelry box. Hmmm.
Charley Memminger is thinking of creating a virtual pawn shop online that will buy and sell only virtual items. But for real money.
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