For some, pawnshops are a lifeline, especially during an economic crisis
Share Now on:
Outside an EZPawn franchise in South Austin, Texas, David Gomez grabs a TV out of his trunk and lugs it inside the store. The 24-year-old says he’s on medical leave from his job at the Tito’s Handmade Vodka distillery and needed some cash to help pay for his mom’s medication.
“Basically we needed a hundred dollars and I didn’t have the money, so I came and brought the TV,” Gomez said.
The other option for Gomez would have been a payday lender, but he sees the pawn shop as a better option.
“I would rather have something lost, where I can work for it harder and get it again, rather than going to a loan place and having debt collectors call me, call my job, call my family,” he said.
Gomez said his credit isn’t good enough to secure a bank loan, so he doesn’t try.
Jordan Birnholtz, COO of PawnGuru, a startup based in Ann Arbor, Michigan, said there are a lot of people in the U.S. just like Gomez.
“Over 30 million Americans are underbanked. They don’t have reliable access to the same financial institutions that the rest of the country does,” he said. “And for those people, pawnshops are an essential resource.”
Essential, yes. But a loan from a pawnshop can also be really expensive. They sometimes charge an annual interest rate in excess of 200%.
With tens of millions of people filing for unemployment since the outbreak of COVID-19, pawnshops have seen a modest uptick in business, becoming essential to some communities.
This is how pawning works (and we’ll take Gomez as our example):
That TV he brought in? EZPawn lent him a hundred bucks for it.
If Gomez can’t keep up with his high-interest payments to get the TV back, the shop will keep it and sell it. It’s called a collateralized loan.
James Crawford, owner of Heritage Jewelry & Loan in Sugarland, Texas, outside of Houston, said the public’s gut reaction is likely that owning a pawnshop during a global pandemic would be “the greatest thing in the world.” But, he said a lot of folks who might be pouring into pawnshops right now are being floated by those $1,200 checks from the Feds.
“We’re seeing people not have that much of an impending crunch on their cash,” Crawford said.
But he noted that the government money’s going to run out pretty fast.
It did for David Gomez at the EZPawn shop in South Austin. But he’s confident he’ll get his TV back.
“I’ve done this before, so I know I get all my stuff out. I didn’t sell nothing, I pawned it,” he said.
He’s just hoping he only has to take a two-week break from his job at the distillery so he doesn’t have to come back to the pawnshop for a while.
Editor’s note (May 18, 2020): A previous version of this story misstated the reason Gomez is currently not working at Tito’s. The distillery says it has not furloughed any workers.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?