Study: Pawn Shops the 'More Efficient Craig's List'

A new study out of Vanderbilt University explores the growing public reliance on pawns shops, businesses that offer customers quick cash short-term loans in exchange for valuables.

More people than ever – about 7 percent – have used a pawn shop, according to the study, as an economic alternative to making ends meet.

Pawnbrokers are nothing new, but historically have been relegated to the seedly underbelly of cash for goods dealings. However, the study suggests that mainstream acceptance of this option is growing due in part to the popularity of TV programs like “Hard Core Pawn” and “Pawn Stars,” lifting the existing taboo many people have long associated with pawned goods.

While customers pay an average of 15 percent interest on pawn shop loans, they are more likely to repay their loans, due to the sentimental attachment to items being pawned, which they get back once their loans are paid.

By comparison, annualized interest rates on pay day loans can be 500 percent, the study says.

“Pawn credit … has the unique – and, to many borrowers, desirable – quality of having no direct impact on one’s credit score and, therefore, no impact on one’s future access to credit,” writes the study's co-author, Paige Marta Skiba, associate professor of law at Vanderbilt University Law School.

In February 2012, Nashua tightened up its pawn shop reporting ordinances for the city's 24 licensed pawn businesses, which now require electronic reporting of transactions. It's something Nashua Police Lt. Michael Moushegian said aids in swifter interception of stolen items pawned for quick cash, while providing evidence for prosecution of the bad guys.

We've uploaded the research paper here for your edification.

What's your take on pawn shops? Let us know in the comments field below.