What is a pawn and how does it work?

A Pawn is a loan that is secured by collateral held by the pawn broker. Different pawn shops loan on different items and all customers provide collateral, which eliminates the need to distinguish high-risk from low-risk borrowers- simply put, the loan is based off the value of the item(s) you want to use a collateral.

A state licensed pawn broker is the only one who can legally write a pawn loan.


Notice to the Public - Pawn Loan Charges

For the purpose of this notice, the term "month" is defined as a period of time consisting of thirty (30) consecutive calendar days.

per California Financial Code (CFC) Section 21003


The Charges listed below are set in California law - they are for loans up to $2,499.99. Loans totally over $2,499.00 are not currently regulated by California State Law. (per CFC Section 21051) and can be negotiated.


1) - Loan Set-Up Fee (per CFC Section 21200.1): It is permissible to charge a fee of 3%, with a $5 minimum, and maximum of $30.


2) - Interest Charges for the First 3 Months(per CFC Section 21200.5): The loan period is a minimum of 4 months. You may pay the loan back at any time. You may be charged a fixed interest rate for the first 3 months based upon how much you borrow. If you cannot repay the loan within 3 months, you will be charged additional interest for the 4th and subsequent months.


Example:

Loan Amount
Total Interest Charge
$0 - $19.00
$3
$20 - $49.99
$6
$50 - $74.99
$9
$75 - $99.00
$12
$100 - $174.00
$15
$175 - $2,499.99
9% of the Loan Amount










3) - Monthly Interest for the 4th and Subsequent Months(per CFC Section 21200)After the initial 3 months, you will be charged additional interest. These charges can be up to $3 per month for any loan up to $100, or 3% per month for loans that are $101 or more. You may be charged a full months's interest for any portion of a month used, even if the loan is repaid prior to the end of the month.


Your loan is due on the last day of the contract period. The loan however, may be extended by mutual agreement between you and the pawnbroker. This agreement must be in writing.


4) - Storage Fee (per CFC Section 21200.6): You may be charged a fee, per loan contract, to store your item. The fee, based on the item size, is determined by the total number of cubic feet needed to store the item.


Example:

Item Size (Spaced needed to store in cubic inches)
Fee    
Less than 1 cu. ft.
$1
1 - 3 cu. ft.
$5
3 - 6 cu. ft.
$10
6 - 7 cu. ft.
$20
Each cubit foot greater than 7 cu. ft.
+$1

.

Other permissable fees you may have to pay


5) - Ten Day Notice Fee (per CFC Section 21201.2): If your loan and interest goes unpaid past the contract date, you may be charged a $3 fee for the required 10-day notice. Within 30 days of the end of the expiration of your loan, the pawnbroker will issue you this notice. If you do not pay the loan, interest and charges due as shown on the contract within the 10-day period, all rights, interest and title to the collateral that you have pledged will be transferred to the pawnbroker. The pawnbroker will then own the property and may elect to sell or otherwise dispose of the property. You may request the notice of termination of the loan period be sent by mail, electronically if the pawnbroker offers that service, or by registered or certified mail, with return receipt requested, upon repayment of these mailing costs. 


6) - Lost Ticket Fee (per CFC Section 21201.1): The pawnbroker may charge you up to $10 if you lose your pawn ticket.


7) - Firearms Fee(per CFC Section 21200.8): You may be charged a $4 fee for any firearm you pawn.


8) - Redemption Receipt(per CFC Section 21204): When the loan is paid in full, the pawnbroker shall provide the borrower with a receipt that correctly states all the fees and charges paid by the borrower to the pawnbroker.


9) - APR The "Annual Percentage Rate" (interest) includes all of the costs of the loan known to be applicable to the loan at the time the loan is written. You can use the APR to compare the costs of this loan with other types of loans. The formula for APR is the Interest + Fees and Charges divided Amount loaned divided by the number of the Load x 12x 100.


10) - Insurance (per CFC Section 21201.3): Pawnbrokers do not have the legal obligation to insure your pawned items.


Below is an Example of the total fees and interest that you would be required to pay on a $100.00 loan.