Local Pawn Shop is Great Economic Indicator

Your local pawn shop is great for many things.  You can get a loan in a time of need, you can sell gold or unwanted jewelry, and you can buy things for much less than retail price.  But what if I told you pawn shops were also a great tool to see how the economy is doing, both on a micro level and on a macro level?  How can that be possible?  Well, since the majority of business a pawn shop does comes from loans, you can actually figure out a lot about the economy.  The more people come in to get a loan, the worse the economy is doing right? And if more people are coming to buy stuff the economy is probably good.  But that doesn’t always tell the whole story.

If you want to find out how the economy is doing head to your local pawn shop.  Try to find out if they are doing more loans, or selling more items.  If they are doing more loans, chances are people are need of cash and things aren’t so great.  If they say they are selling more you can guess people have money to spend and people are probably doing better.  Right?  Makes sense.

 However, this doesn’t always tell the true story.  I can tell you from my business, a lot also has to do with whether people are paying the interest on the loans or not.  I’ve learned that no matter how good the economy is, people are still going to need pawn shops for quick loans.  Whether it’s to bridge a gap or to make payroll, people always need loans.  But in a bad economy I’ve found it’s harder for people to pay back the loans and pay the interest.  In a better economy people pay on time and redeem quicker.  In a good economy, someone might need a fast loan to invest in something and they don’t have time to wait for a bank.  They can use a pawn shop, get quick cash and make the investment.  Assuming it’s a good economy, they will have the money back in no time and pay back the loan.  But in a bad economy the same person makes that investment but doesn’t make their money back as quick, and then gets behind with payments, and may eventually default on the loan.  So for me, finding out whether or not people are paying interest is actually a better indicator towards the economy than if people are buying more or if the pawn shop is doing more loans.

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