Sunday, June 19, 2011

Pawning Goods Online.

Having previously worked in the pawn-loan industry for the vast majority of my "working for other people" years, this is one of the most interesting things that I have read in a while.


To use the service, people fill out an online application form on for items they want to pawn and Pawngo will reply within an hour with a quote for how much it will loan the person for the item.

If they agree, they print out a Fedex label, take the item to Fedex and ship it overnight–it’s insured by Lloyd’s of London–to Pawngo’s facility in Colorado. Once Pawngo evaluates and authenticates the item, Pawngo emails an offer for how much it’ll offer for the pawn. People can accept the offer and the money will be transferred to their bank accounts. Or they can decline and Pawngo will Fedex the item back for free.

The average loan period is three and a half months at annualized rates from 36% to 72% That’s much lower than brick and mortar pawn shops, which charge 180% a year on average, says Todd Hills, co-founder and CEO of Pawngo. The typical loan is for $2,000, which means that people would pay $360 in interest on a $2,000 loan for 90 days.

The brilliant part of this, is that the company is able to employ very few people, who are essentially able to do work all around the country! Furthermore, they can set up in a cheap warehouse, rather than actually needing to have a storefront. It saves on all sorts of costs; insurance, utilities, cap-ex, and a host of others.

It's brilliant. Absolutely brilliant. I wish that I would have come up with the idea. I look for the publicly traded pawn shops to make some sort of move in this direction in the coming years.

As a side note, studies like this one from the Federal Reserve, are simply an expensive (well, really not that expensive when you just print money) way of stating the obvious.... Pawn shops and other userous institutions locate where there is a demand for their service. Even though the Fed has historically done a shitty job of analyzing things, in this study, they actually do a pretty good job, as they realize that pawn shops make the lives of their clients much better.

Disclosure: None. This is not investment advice of any kind. Always do a ton of your own research before doing anything that I write, talk, do, or so much as even think about.

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