Online Pawn Shops New Trend Among Pawners, Shoppers

DENVER (CBS4)- Customers with short-term cash need have few options in today's economy and pawn shops want to make sure they are on the list of options. Part of the appeal is that pawn shops don't check credit and they don't report to credit bureaus.

A pawn shop's core business is lending. About 85 percent of the people who trade in something of value for a loan will pay back the money with interest and get their stuff back. That's pawning.

Some people will sell their stuff outright for cash.

One Colorado man is changing this pawn industry in a big way. A traditional brick and mortar pawn shop has stuff stacked outside and shelves full inside.

When you ask Rodolfo Cabrera about pawn shops he said, "I mean, I feel bad getting into those shops to be honest with you. I mean, I don't want to do that."

Cabrera is exactly the person Todd Hills, PawnGo CEO and Co-founder, was thinking of when he said, "We have a new pawn customer out there."

That customer is online. PawnGo is the brain child of Hills, a one-time owner of 21 pawn shops in Colorado. After he was bought out, he took an industry he knew so well to the internet.

Hills said, "If we can create a user experience on line, which is where they're doing business now, they're banking online, they're buying things from Amazon online, the world is all on line."

And there's anonymity. Cabrera had three items to pawn.

"A necklace with a gold cross, my wedding ring and my gold bracelet," said Cabrera.

He needed cash quick and got $700. He agreed to pay PawnGo six percent interest a month on a 90-day loan. PawnGo's interest rates range from three to six percent.

CBS4 Consumer Investigator Jodi Brooks compared that to pawn shops around town. We found interest rates are higher and ranged from 10 to 20 percent.

Hills said, "The average brick and mortar loan is about $150. My average loan is now approaching $2,500."

He says PawnGo is appealing to clients who were once affluent but seem to have hit a rough patch in this tough economy.

Hills offered some examples of items recently pawned. He held up a watch and said, "This watch is probably about a $45,000 to $50,000."

He then held up a diamond ring and said, "They got a $30,000 loan on this ring."

Here's how PawnGo works: You enter a description of your item online. PawnGo sends you a preliminary offer. If you accept it, you print a FedEx label and send the item to PawnGo. PawnGo pays for shipping and insurance.

Pawngo uses biometrics to enter a tightly secured vault. The vault is where all of the items are evaluated and a formal offer is prepared. It is a much different process than the traditional pawn shop.

"I think I'd be nervous about popping something in the mail and shipping it off to somebody I didn't know," said Vicki Skigen, a retail pawn shop owner.

Skigen still sees the value in a face to face transaction. In her store, shoppers who look for a bargain can see and touch the merchandise.

Hills said, "I really don't see it as a competitor," because his customers are like Rodolfo Cabrera.

Cabrera said, "I don't want to be seen, you know."

PawnGo promises personal service.

"You can call the CEO of the company's direct cell phone," said Hills, which is listed on pawngo.com.

PawnGo is backed by Lightbank, an investment fund founded by the guys who started Groupon. The expert in the pawn industry is now partners with the experts in the internet industry.