So, what exactly is a Pawn Shop?

You see them in the various parts of town and you've been wondering just exactly what is a pawn shop, how do they work, and why are they becoming more commonplace? At Apache, we are a bit different than the average Pawn Shop, and we'd be happy to answer your questions. So, lets take a look at the history of pawn shops.

As mankind's oldest financial institution, pawn broking carries on a tradition with a rich history. Pawn broking can be traced back at least 3,000 years to ancient China, and has been found in the earliest written histories of Greek and Roman civilizations. Out of economic necessity, and because of problems in the banking system, pawnshops made a return in later years. The House of The Lombards operated pawnshops throughout Europe. They even counted royalty, such as King Edward III of England, among their clientele during the 14th century. The symbol of the Lombards' operations were the three gold balls that still remain the trademark of pawnshops.

Pawn brokers, also known as collateral loan brokers, make loans based purely on the intrinsic value of the collateral. Checking the customer's credit history is not necessary because only the value of the item being pawned is considered. If the loan, or at least the interest, is not paid off during the specified term (usually three or four months), the item is forfeited and may be resold by the broker. A typical pawn transaction begins with a potential borrower coming into a pawnshop with the item he or she wants to pledge. The pawnbroker then determines how much to loan the patron for the item. Loans are paid out at a rate of about one-third to one-half of the price the broker can expect to receive for the sale of a good during the worst of times Pawning has long been a source of capital for people in times of need, as well as a means of financing business ventures. It is interesting to note that Christopher Columbus pawned Queen Isabella's crown jewels to pay for his adventure to America .

Today, statutory regulations of banking and finance are based on the legal foundation established by pawnbrokers. Many of the first leaders in the banking industry had roots in pawn broking. As was the case 3,000 years ago, pawnshops continue to be a source of convenient credit for individuals in need of a short-term loan.

The pawn industry came to America with the first settlers, and in the early parts of this century, pawn broking was regarded as the main source of consumer credit. With the rise of large consumer credit institutions, such as finance corporations, savings and loan associations, and credit unions, the pawn shop is no longer the main source of consumer credit. But the pawn shop still plays a vital role in providing consumer credit.

The general public needs to borrow small sums of money that other sources are not willing to provide, and this resulted in the rise of popularity of pawn shops. What chance do you think you would have in securing a $300.00 or smaller loan from a financial institution for a 30 to 90 day period? The cost of the paper work alone prohibits them from making such loans on a regular basis.

And so, the Pawn shop reatins it's place in the cultural and financial fabric of the modern society, fulfilling a unique need and serving a very specific role.