When it comes to a pawn shop, many people do not think of it as an alternative funding source to stocks, hedge funds, etc. In fact, many people think of it as a run-down looking place where you can get loans that are no more than a few thousand bucks, or you can pawn a valuable item that is stolen or legit for quick cash totaling no more than a few hundred dollars. However, pawn shops are much more than obtaining quick cash or loans for a few thousand dollars or less. And thanks to Hollywood with their negative portrayals of pawn shops, these portrayals are myths. Pawn shops are legitimate businesses that do not buy stolen items, and most of them are aesthetically pleasing.
How do Pawn Shops Work?
Pawn shops resell retail items, provide personal loans, and offer auxiliary services, including money transfers, mobile activation, and more. Their standard business model consists of principal income sources from retail sales’ profits and earning interest on loans. When a customer gives an item as collateral for a loan, the pawn shop will then work on making a loan for that customer. The pawnbroker must charge a higher interest rate on the loan than traditional bank loans due to a high default loan risk. If the customer does not repay the loan and interest or minimally the interest charge, he/she forfeits the item used as collateral to the pawn shop. These companies can make money also by selling items used as loan collateral from defaulted customer loans, and they make money by selling items bought directly from customers.
How the Pawn Shop Industry is Good Especially During Recession?
The pawn shop industry is not only a considerable funding source for customers putting up collateral for a loan, but it is also a good funding source for investing in it especially during a recession. With an increased prediction of a recession due to the little progress made between the US and China trade discussions, for instance, the pawn shop market will more than likely grow astronomically. This is due to the massive numbers of people relenting to quick funds to pay their bills and manageable daily spending. Also, pawn shops’ customer base is broad especially during periods of recession. The customer base range from the working class to the wealthy. So, you are looking at a significant amount of return you can receive for you and your family.
Investing stocks in this industry will serve as a hedge against standard recessionary issues that typically cause the decline of most stocks. And thus, these types of alternative financial services tend to be resilient during a downturn that leads to well-performing equity values. Economic hardships give pawnbrokers an opportunity to attract significantly more creditworthy customers and retain their traditional customer base due to the tendency of credit card companies and banks to become more stringent with lending standards during such challenging times.
Pawn shops are more valuable than many people realize. These companies go beyond the exchange of collateral for average, quick cash that is no more than a few thousand dollars. It also is a wonderful alternative funding source to invest in during recessionary periods whereas other investments are more than likely to take a nosedive.
So, become an advent stock market, financial, and trade onlooker today. The inversions of the economic yield curve, lackluster economic data, and more will show when it is the best time to utilize the pawn shop industry.