How do pawnbrokers work?

One way of raising money quickly can be to turn to a pawnbroker - but there are many things to keep in mind when dealing with one of these stores.

The stereotypical image of a pwnbrokers shop is a dark, small room with some crooked old-man sat behind the counter. While this may not be far from the truth, the much imagined exploits of tv and movie stars pawning their wedding rings for some extra cash is quite far from the truth.

In short, a pawnbroker offers loans to people who give them something of value – or the pawn - in return.

Once the transaction has taken place, the customer is given a receipt which will then need to be produced when coming back to claim the belonging.

If this document is mislaid, this can cause major problems and another agreement may have to be drawn up as soon as the loss is noticed. if you do use a pawnbroker's service then keep your receipt in a safe place. Putting it in your wallet or purse is never a good idea as it can get mixed up with other receipts and is easy to lose. Leave it at home stored away safely and make sure you remember where you put it!

Agreements can vary, but generally there will be a set period of time for repayment of the loan, after which the broker can either keep the item themselves or sell it. However, this is where friction can sometimes occur – a broker may believe an item is less valuable than the person who has taken out the loan – and its value may have changed.

In these situations, the courts can become involved, but may be more likely to rule in favour of a broker if the goods were sold at auction.

Many finance experts advise against using a pawnbroker, but if you have bad credit history then it can be difficult to get credit from banks. If you have to use the service then make sure you keep your wits about you and get the most value from your pawn. Keep your receipt with you and make sure you pay the loan back before the agreed deadline date.