Kevin lives in a low-income neighborhood and has a precarious job. With his meager salary, he can barely make ends meet. As a result, he often doesn't have the funds to cover certain essential expenses. He would like to obtain a loan from a financial institution. However, having repeatedly failed to pay the minimum required on his credit cards, this is impossible. So he turns to a thriving local pawnshop business.
Kevin shows up with his television set, which he intends to pawn. The set is worth $300. He manages to get... $35, just over 10% of its value! They promise not to sell it until he comes to pick it up a month later for $41. If Kevin wishes to leave his TV with the pawnshop any longer, he will be charged interest as well as administration and storage fees. At the end of the month, Kevin still doesn't have the funds to retrieve his precious TV. So he decides to pawn his TV for a second month.
Eight weeks later, Kevin wants his TV back. He had to pay $62, because a $20 fee had been added. Since he has $65 in his pocket, he pays. What Kevin doesn't realize is just how high the fee is. In fact, since the difference between the amount of the loan and the amount paid to get the property back two months later is $27, Kevin has paid the equivalent of an annual interest rate of over... 400%! What's more, if he hadn't picked up his property at the agreed time, the merchant would have been able to sell it at a relatively high price.
Was dealing with a pawnbroker the best option for Kevin? No. This type of parallel credit should be avoided at all costs, as the consumer can lose a considerable amount of money and never get his or her property back.
Are you in financial difficulty and looking for a pawnbroker? Before doing so, consult the consumer association and ask for a free budget consultation. If you live in downtown Montreal, the association isOption consommateurs.
You can also visit the Center de Référence du Grand Montréal to find out which organizations can help you in your area.
To find out more about pawnbroking, watch the video produced byOption consommateurs with financial support from the Office de la protection du consommateur.
