An old business, with sometimes new ideas

As long as there has been money, there has been someone who needs to borrow some. As long as people have needed to borrow money, there have been pawnbrokers. Some were operating in China 3,000 years ago.

But the business is always changing and sometimes pioneering.

For instance, pawnshops were buying and reselling CDs and DVDs long before the video industry got into the business, says David Creech, one of the managers of Plaza Pawn at 2100 William St.

People go to pawnshops when they need quick cash. They pawn items when they need a small loan a bank won't handle. Someone with bad credit can get quick cash because a pawnshop won't check his credit rating. The pawnbroker's interest is in the value of his collateral.

In the past decade pawnshops have had competition from businesses that offer payday loans, made when the customer leaves a post-dated check for the amount of the loan plus interest. The loan and interest are repaid on the customer's next payday.

Creech said payday loans might be a convenience for someone who doesn't have something of value to pawn, but he thinks payday loans carry too much risk.

"As a consumer you are writing a bad check," he said.

Daniel Wilson, who with his parents co-owns Money Time Check Cashers and Pawn, 1901 Independence St. in Cape Girardeau, said his store was the first in the area to offer payday loans but got out of the business about four years ago because collecting on bounced checks was too much trouble.

Payday loans have come under the scrutiny of Attorney General Jay Nixon, who said the loan companies are thriving "at the expense of cash-strapped Missourians."

Payday loans can be renewed up to six times, Nixon said, which allows loan companies to charge interest rates of up to 1,950 percent. Customers find themselves unable to pay the loans, then take out other loans to cover the previous loans and sink further into debt.

Running a pawnshop is more profitable for the family-owned shop than the payday loan operation because there are fewer financial losses, Wilson said. It is also more convenient for customers who need a loan banks won't handle, as long as they have an item of value to put up against the loan.

"We take different collateral than banks will," Wilson said.

Pawnshops also operate on a cash basis and don't have to worry about collecting bad checks.

There is no time limit on a pawned item as long as the customer keeps up the interest payment, which does not accrue at the rate a loan company charges. When a customer pawns an item, the pawnbroker charges a fee that includes interest and storage and security costs. As long as a customer pays the monthly fee, the pawnbroker will keep the collateral until the customer pays off the loan or forfeits the item.

Wilson pulled out the index-card payment record for a customer who took out a $35 loan in 2002.

"He's paid us interest on time without fail," he said.

The customer has paid $250 interest on a $35 loan at $10 a month.

The interest rates on a pawned item remain constant, Creech noted, unlike credit cards that lure customers in with a low interest rate then charge a higher rate if a payment comes in late.

"Our rates are fair and in line with most places," Creech said.

Pawnshops take as collateral items they know they can sell. Diamonds and gold jewelry are popular, as are computers, stereo equipment, cameras, tools and guns. Pawnshops charge less than a retail store, yet they still make a profit.

Wilson said many people come to his store looking for good deals.

"We come across estate sale pieces, antique pieces, you never know what's going to make it in here," he said.

Pawnshops also have a rich history. Queen Isabella of Spain pawned the crown jewels to finance Christopher Columbus' trip that led to the discovery of the New World.

"There's always going to be somebody needing money," Wilson said.

lredeffer@semissourian.com

335-6611, extension 160