Pawnshops have a bad rap: seedy buildings on the outskirts of town, shelves filled with fenced goods, heavies behind the desk hawking usurious loans to the cash-strapped and the unbanked. The stereotype is not entirely unmerited. But it is one that the industry contests and eagerly wants to change, and one new start-up has gone perhaps the furthest in reimagining and recasting the pawnshop as a modern, friendly, transparent business. It is called Pawngo, and it wants you to feel comfortable pawning your stuff.
Launched earlier this month, Pawngo mostly works just like a regular pawnshop. Customers seeking a short-term loan offer an item. Pawngo appraises it and then offers a loan smaller than the item's assessed value. For instance, a watch appraised at $1,000 might act as collateral for an $800 three-month loan with 5 percent monthly interest. If the customer pays Pawngo back, she gets her watch returned to her. If not, she keeps the cash and Pawngo keeps the watch.
There are a few marked differences, though. One big difference is physical. Nearly all U.S. pawnshops are strictly brick-and-mortar businesses, selling unclaimed goods and appraising new items on site. But Pawngo—backed by Lightbank, an investment fund started by two Groupon founders—is a posh website. Business is conducted via email and over the phone. The customer sends in and gets back her collateralized item by FedEx overnight. Her loan comes not in cash, but by bank transfer. Pawngo eventually plans on opening up its own Web shop for acquired (that is, unredeemed) goods. For the moment, though, it sells those goods through other online retailers, auction houses, and eBay.
The second, more important, difference is that Pawngo seeks an upscale clientele. The average pawnshop loan is just $100, and the typical customer has little or no savings. But Pawngo caters to "college-educated, working professionals with temporary cash-flow problems," says its chief executive officer, 25-year pawn industry veteran Todd Hills. The company accepts "high-end" goods as collateral: diamond rings or gold ingots, yes; used televisions or old saxophones, no. And it makes much bigger loans than the average pawnshop. The median loan is $1,700, and the ceiling is $100,000. So far, more than 90 percent of customers have repaid and gotten their items back, Hills says.
To attract that more upscale clientele, the website is brightly colored and professionally designed. It looks like yuppie financial-services sites such as Mint. And the company stresses its transparency, security, and discretion.
Hills says that pawn's bad rap is Pawngo's—and the industry's—biggest challenge: He wants to convince the average American that pawn is a financial service worth considering. "We're overcoming 3,000 years of reputation," he says. "We're not in the bad part of town, the part where you're afraid to drive your family. You can literally complete the transaction in your home." He continues: "The pawn shop has a new address, and it's WWW."
He is not alone: Of late, the entire industry has tried to recast its image in order to attract a broader base of customers. "This growing, competitive industry is constantly working to enhance the image of pawnbrokers," the National Pawnbrokers Association promises on its website. "Today's pawn stores are attractive, welcoming places to do business. Most of them are family-owned and operated stores that offer superb customer service."
Pawngo is one of few online shops in the United States, but Wonga and Borro in Britain are chic and webby. And many brick-and-mortar stores have gone through rebranding and upgrading efforts in the past few years too. Several chains have redecorated their stores and dressed their employees in khaki pants and collared shirts. Some pawnshops have even contemplated dropping the "pawn" name entirely, instead advertising their "asset-backed loans."
New media attention on the industry is helping change minds, too. Las Vegas' Gold and Silver Pawn Shop, for instance, is featured on the History Channel's hit show Pawn Stars. Its owner specifically says he hopes to change pawn's tarnished reputation. Other shows, like truTV's Hardcore Pawn, sometimes portray the industry in a less-flattering light. But by and large, pawnbrokers still applaud them.
So why has pawn—which is under any circumstances a high-cost loan for people with few financial options—suddenly gone upscale? Primarily because pawn businesses are making a play for the enormous pool of customers shut out by the credit crunch and hurting in the aftermath of the recession. It is now much harder to get a new line of credit, a home-equity loan, or even just a basic cash loan from a bank, particularly if you have a bad credit score. Customers with short-term cash needs have fewer options, and pawnshops want to make sure they are one of them—especially given that pawnshops do not check applicants' credit and do not report to credit bureaus.
But there remain a number of good reasons why you might not be mailing off your wedding ring to pay off your credit cards or car repair bills anytime soon. Pawn remains a bad deal for customers with other options: The interest rates are typically hundreds of percent when annualized. An elegant website, a salesman in khakis, and a leather chair do not change that fact. But as long as credit is tight and the economy poor, there will remain a huge market for such short-term, high-cost loans. And perhaps you'd rather mail away your watch from the privacy of your home than take it across town to the pawnshop.