This is how the process works… A pawnbroker provides small cash loans to customers using personal items as collateral. Many brokers secure jewelry such as diamonds, watches, gold, and precious stones as collateral, for cash loans around $200. Pawnbrokers may also give you a loan using items such as televisions, cameras, and electronics as collateral. So there are no issues on the collection of the loan, brokers physically secure the collateral items.
All pawnbrokers are licensed in the state of New Jersey through the Department of Banking and Insurance. The State Department of Banking view NJ pawnbrokers as a financial institution. The pawn broking statutes currently allow for an interest rate of 3.75% per month. E and B terms are set to 3.5 % a month. E and B loans are usually held for a 30-60 day period after maturity before sale.
Prior to the sale, customers have two options regarding their transactions.
- Option 1: Payment of interest only – customer pays the amount of interest accrued on the loan and can then extend the term another 90 days.
- Option 2: Payment of accrued interest and loan principal – merchandise is returned to the customer and pay interest on their loan for as long as they wish, with no final term.
After the required notice has been made and the sale date has passed without payment, the broker can begin sale of the item. If all conditions are satisfied, the item can then be sold on a retail or wholesale basis. The redemption rate for loans made at E and B run at about 42.58% APR, meaning interest is paid on that percentage of items pledged.