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How does a pawnshop determine the loan value for pawned items?

Ever wondered how Melbourne pawnbrokers come up with the prices they put on items? Is there a difference between how they price gold jewellery and electronics? Logic dictates that there should be different pricing since these two are different and serve different purposes. There are a few factors that pawnbrokers take into account when evaluating anything from precious metal jewellery to D-I-Y power tools.

The pawning process begins when a customer decides that they have something of value that they would like to get cash for and then present this item to a pawnbroker. Pawnshops accept a variety of things, some are more common than others these include:

Gold jewellery
Electronic equipment
Music instruments
power tools
motorcycles, ATVs
… and more

When it comes to jewellery, gold is one of those precious, highly sought out metals. You can never go wrong with gold even if it is scrap gold.

Melbourne pawnbrokers also look at an item’s condition and marketability. They take into account the flaws, scratches, and other damage. The marketability of items also depends on supply and demand.

Some items are harder to sell which is why pawnbrokers reserve the right to refuse items that are brought in to be pawned off or sold. Gold jewellery for the most part does not get outdated, become obsolete or unsalable.

Most pawnbrokers are trained to identify certain precious metals and gems. They can also tell if something is real or counterfeit. Pawnbrokers are also required to establish positive identification of borrowers who bring their items in. they have to take the responsibility of ensuring that they aren’t involved in fraudulent activities. Even with precautions that they take, some people might still try to sell things that do not belong to them which is why sometimes law enforcement advises robbery victims to go to their local pawnshops if they have been victims of crime.

Once a pawnbroker determines whether an item is real, not stolen, and can be sold, he will make a cash offer for it. The customer can then decide whether they want to put it up as a loan or sell it.

How the loan amount is determined

When determining the loan amount, the pawnbroker has to account for several things. The key factor is the low and high value of the item in terms of how much the item can be sold for if it is sold in the shop (high) or to another wholesale retailer (low).
The pawn shop will also take supply and demand into account. If the local market is saturated and it doesn’t seem like the gold jewellery will sell well as is or as scrap then the pawnbroker will offer a low amount.

Brick-and-mortar establishments also have to factor in overhead costs and make a profit on every transaction they make.

Whilst determining the loan amount, a pawnbroker has to assess whether the customer is likely to return the item or not. He can do that by casually asking you for some personal information. It might be in his best interest to know why an engagement ring is being sold, for instance. Some customers will try to negotiate a higher price by talking about how important an item is to them so that they get the amount they want. It could be true or not so true so determining whether someone is likely to come back for their goods is a subjective matter. There are customers who will keep pawning the same item to the same store repeatedly and always paying the loan back on time; in such cases, a pawnbroker can be somewhat certain that the items will be redeemed and the loan repaid.

The bottom line is that even though it might seem like pawnshops buy anything and everything the truth of the matter is that they are businesses that have to make a profit at the end of the day. To do that they have to factor in a lot of things. The advantage of having gold jewellery to pawn is that it is a precious metal that is always in demand and whether it is in pristine condition or badly damaged, there is always a way for the pawnbroker to make a profit from gold.