Cash America 1999 Annual Report Download - page 7

5
The pawn
loan acts as an easy-to-use contract
between the lender and the
borrower. The loans are short
term, typically about ninety
days in the U.S. market, and
secured solely by the collateral pledged.
The customer is afforded the opportunity
to utilize items of personal assets, such as
jewelry, electronics, tools or everyday
household items as collateral to generate
cash in time of a need.
The collateral may be redeemed at
any time during the loan period
through the payment of principal and service
charges due under the terms of the contract.
The collateral remains the property of the
borrower while the loan is outstanding. In
most cases, Cash America’s customers redeem
their loans and reclaim their assets, which have
been carefully maintained in a secure location
throughout the loan period. In the event the
customer chooses not to redeem the collateral,
the ownership of the asset passes to
Cash America with no remaining obligation to
the borrower. While these instances occur in
only about three out of every ten loans
made, Cash America is prepared to
market the collateral item for resale
in an environment similar to a small
department store. Cash America’s
large number of outlets spread throughout
diverse regions allows the
Company to liquidate unredeemed
merchandise in a timely and orderly manner.
In most cases, Cash America recovers its loan
amount plus a residual profit, unlike most
traditional lenders forced to sell reclaimed
collateral often at values less than the amount
loaned. Since the concept of the pawn loan
provides for these contingencies, the customer
is welcomed back as a borrower at Cash
America should the need for another loan
materialize, regardless of past credit history.
0$30
(in millions)
$60 $90 $120 $150
A
V
E
R
A
G
E
L
O
A
N
B
A
L
A
N
C
E
year ended
DEC 31
1999
1998
1997
1996
1995
The Loan Transaction: