A Pawnbroker's Guide to Loan Agreements

California law requires pawnbrokers to have a written contract or loan agreement for every piece of property that is pledged as security for a loan. Since legal contracts can be complex, and because the legal requirements can change from time to time, collateral lenders can best protect their businesses by hiring a lawyer to draft these loan agreements.

Information on Loan Agreements

A lawyer can ensure that all the necessary information is on the contract. This includes the loan period, which must be a minimum of four months in California. Each contract must clearly specify when the loan is due, and it must explain that the individual has the right to redeem the pledge at any time during the loan period. The document should explain that, to redeem the property, the individual must pay the full balance of the loan and any accrued charges.

Retention of Property

A collateral lending agreement covers the retention of the pledged property. All pledged property must remain in a pawnbroker’s possession for the duration of the loan period, or until the individual redeems the pledge. Collateral lenders are only allowed to store property at a location other than their main premises if both parties agree in writing that this is allowed. If so, then the loan agreement must provide for the return of the redeemed property by the next calendar day, or when the storage location and the main premises are both open.

Termination of Loan Period

The parties have the right to extend the loan period, if both parties agree to do so in writing. Otherwise, the pawnbroker must provide written notice of the termination of the loan period within one month of that date. Collateral lenders can treat the property as their own upon the expiration of the 10-day waiting period, which starts with the written notice of termination.

Collateral lending professionals near Concord, CA can turn to The Law Offices of Jon Webster for carefully designed loan agreements. Our law office represents the Collateral Loan and Secondhand Dealers’ Association—a relationship that reflects our extensive experience and in-depth knowledge in this field. Call (925) 609-7600 to request a consultation.

Categories: Property Management

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