Pawn Shops Explained

Pawn shops offer collateral-based loans to consumers. If you have an item of value, you can take it to a pawn shop and use it as collateral for a loan by “pawning” the item.

The loan you get won’t be the sum total of the item’s value. Instead, the pawn shop will offer you a loan and you will have to pay back the loan with any fees and interest before the instituted deadline.

Pawn shops succeed because of the low risk for the loans they offer, and because the loans are typically very short term. If the customer defaults, the value of the item generally makes up for the loss from the loan.

The Pawning Process
You go to a pawn shop with your valuable item, the pawn-broker appraises the item and offers you a loan with terms that likely include a low interest rate, a loan origination fee, a deadline for repayment and mention that you will lose the item with failure to pay.

The pawn-broker takes possession of your item and you get the money and a pawn ticket that is essentially a receipt. If/When you repay the loan in full (prior to the deadline), you present your ticket and get your item back.

If you don’t repay by the deadline, you forfeit your item. There are no other collection actions taken by the pawn shop.

A 24-Hour Pawn Shop
If you find yourself short on cash and in a critical situation, you should look for a 24-hour pawn shop to receive a quick loan. You must prove that you are the legal owner of the item you are pawning.

This generally involves a number of questions that only the item owner would know. You will also need a form of government-issued identification to show the pawn shop.

Finding Pawn Shops Nearby
Finding pawn shops nearby your home is relatively easy, they are everywhere in medium and large cities. The National Pawnbrokers Association has a search section where you can use to find a pawn store near you that is a member of this professional group. Just type in your zip code scroll through the pawn shops located in your area. As you look for a pawn shop to use, you can also check specific shops reputation with your local Better Business Bureau, which tell you if consumers have had problems with a pawn broker in the past.