CANDICE CHOI

NEW YORK (AP) â¿¿ Pawn shops are beckoning from the shadows.

At a time when banks have shut their doors on those with bad credit, a growing number of borrowers are pawning their jewelry, electronics and other valuables to make ends meet.

Consumer advocates say the development is concerning because the interest rates on loans from pawn shops can be as high as 20 percent a month. But pawn shop operators say they provide a critical lifeline to a group with few other options.

"It's a short-term loan â¿¿ it's designed to bail someone out and be done with it," said Ed Bean, who owns Suffolk Jewelry & Pawnbrokers in Boston.

A common misconception is that pawn shops simply buy the various knickknacks that customers bring in. But the more lucrative aspect of the industry is issuing loans against those belongings. Customers often prefer borrowing over selling as well because it lets them hold onto what may be their only tickets to cash in the future.

What's key about loans from pawn shops is the lack of judgment; a credit check isn't required and they don't have an impact on credit scores. The transaction takes just a few minutes in many cases.

A pawn shop owner simply eyeballs the merchandise a customer brings in and offers a loan amount on the spot. If the customer repays the loan within 30 days, the belongings can be reclaimed. The customer can also opt to extend the loan; many borrow against the same items over and over.

If a customer fails to repay the loan, the shop can put the collateral up for sale.

The National Pawnbrokers Association says its members are reporting record growth as a result of persistently high unemployment, coupled with soaring gold and metal prices. The group says the popularity of the shows "Hardcore Pawn" on truTV and "Pawn Stars" on the History Channel are opening up the industry to a broader customer base as well.

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