WHAT IS A PAWN SHOP: Meaning & Purpose of a Pawn Store

what is a pawn shop

Have you ever visited a pawnshop? For many people, there appears to be something shady about these places. However, if you haven’t visited a pawnshop, you may be missing out on some great deals. A pawnshop is similar to a dozen garage sales and a flea market combined. Pawnshops are also important in many communities because they provide people with an easy and quick way to borrow small amounts of money. This article will teach you everything you need to know about an online pawn shop and how to get the loan.

What is a Pawn Shop?

Pawn shop company that lends money at high-interest rates in exchange for collateral such as jewelry, electronics, or anything else with resale value. The collateral is kept by the pawn shop, and if the loan is repaid, the item is returned. If the money is not repaid, the item is sold and the proceeds are kept by the pawn shop. Pawn shops typically lend money to people with lower incomes who do not have access to other forms of credit, such as credit cards or a bank credit line.

How Does a Pawn Shop Work?

A pawnshop or pawnbroker is a business that lends money to individuals without conducting a credit check based on the value of a collateral item. According to the National Pawnbroker’s Association, “[C]ustomers pledge property as collateral, and in exchange, pawnbrokers lend them money. Pawn loans are made on everything from jewelry to electronics.”

#1. Process

A person seeking a small loan brings in an item, and the pawnbroker determines its resale value using value books and the Internet. Pawnshops Online estimates that the average consumer loan is between $70 and $100. The individual can repurchase the collateral for a fee or allow the item to remain with the pawnbroker and be sold retail.

#2. Loan amount

Pawnbrokers typically appraise a collateral item and make a 30-, 60-, or 90-day loan to a customer based on the collateral’s value. In general, the loan amount is less than 40%, with an industry average of around 33%. For example, if a customer brings in a watch worth $150, the pawnbroker will offer a loan of $49.50.

#3. Interest

Interest rates differ by state because each state has its interest rate cap. On the loan amount, interest rates range from 2% to 12% per month. To increase their profitability, some pawnshops charge fees such as stocking or handling fees. These fees can range from as little as 5% to as much as 20% per month. As a result, a $50 loan over 30 days could cost between $3.50 and $16 in interest and fees, in addition to the loan amount.

#4. Purchasing items

Customers may bring in items to sell outright rather than taking out a loan to avoid paying interest or simply because they no longer need the items. The pawnbroker will examine the item to determine its condition before consulting valuation books and conducting an Internet search to estimate its resale value.

#5. Selling items

Pawnbrokers, like any retailer, sell both purchased and collateral items. The items are displayed on display shelves and in window displays. Pawnshops, on the other hand, differ in that the price of each item is negotiable. The pawnbroker knows the retail value as well as the purchase or loan price and uses this information to determine the lowest acceptable price.

What is a Pawn Shop Loan?

A pawn shop loan is a secured, short-term loan you can get from a pawn shop. Other than the item you leave as collateral for the loan, these loans do not require a credit check or any other specific requirements.

You’ll typically receive 25% to 60% of the pawned item’s value, with the average loan amounting to $75 to $100. You can get your item back if you pay off the loan in a certain amount of time.

According to one pawn shop, monthly interest rates range between 20% and 25%, plus any fees. That’s the same annual interest rate as many credit cards, so a pawn shop loan should be considered a last resort for most households.

How Does A Pawn Shop Loan Work?

You go to a pawn shop with something you own that you’re willing to leave as collateral to get a pawn loan. The staff evaluates the item’s value, condition, and resale potential before deciding whether or not to make a loan.

According to Nolo.com, a website that answers legal questions, pawnshops will lend you between 25% and 60% of the resale value. It may be worthwhile to shop around and compare quotes from various pawnshops because prices can vary greatly.

If you accept a loan, you will be given cash and a pawn ticket, which you will need to retrieve your item. Take a picture of the ticket and email it to yourself as a backup in case you misplace it.

A pawn shop loan does not require a credit check because you left collateral with the lender, but you must be 18 or older and show proof of your identity. To avoid dealing with stolen goods, pawnshops maintain regular contact with law enforcement, so the shop may require proof of purchase or ownership of the item.

The items you can pawn differ depending on the store and location. Jewelry, firearms, electronics, tools, and musical instruments are typical high-demand items.

You then return within the agreed-upon time frame, which is usually 30 days to two months, to collect the item and repay the loan (plus fees and interest). Fees differ by state and can include insurance and storage.

If you are unable to repay the loan within the original term, you may be able to extend or renew it. If you are unable to repay the loan, the pawnshop will sell your item to recoup its losses. According to the National Pawnbrokers Association, the average pawnshop loan is about $150 and is repaid in about 30 days.

Pawn Shop Loan Requirements

One advantage of a pawn shop loan is how simple it is to obtain one. In many cases, all that is required is a valuable item and a government ID. The following are typical pawn shop loan requirements:

  • A valuable item is required as the primary collateral for a pawn shop loan. Jewelry, electronics, guns, or vehicles, for example, could be used as collateral. It is possible to secure a pawn shop loan if you and the pawn shop can agree on the value and loan amount.
  • Most lenders will require you to show a valid government ID for them to verify that you are legally able to take out the loan.

A pawn shop loan, unlike a traditional installment loan, does not require a specific credit score or a cosigner. You could walk out with cash on the same visit if you can provide a valuable item and a government ID.

Benefits and Drawbacks of Pawn Shop Loans

Here is a quick summary of the benefits and drawbacks of borrowing from a pawn shop.


  • You do not require a high credit score.
  • There is no application process.
  • Appropriate for short-term emergency loans
  • Emergency funds are available immediately.
  • If you fail to meet the terms, it does not affect your credit score.
  • Debt collectors do not exist.


  • You lose your goods if you default on your loan.
  • Pawn shop loans have high-interest rates.
  • Generally, you pawn high-value items for low-value loans.
  • The standard loan repayment period is only 30 days.

Pawn Shop Online

The best online pawn shops for both buying and selling are listed below.

#1. YouPawn

YouPawn is an online pawn shop that allows you to earn up to 20% more money by pawning. It only takes four simple steps.

  •  Provide information about the item you want to pawn.
  • Get a quote right away based on your information.
  • Ship your item using the free shipping label provided to you.
  • Receive your money electronically.

#2. Pawn America

This company is essentially a massive online pawn shop that collects items from people like you all over America. You can also purchase items much cheaper than at retail. They have thousands of listings and add hundreds more every day.

#3. Mannisi Jewelry

Though the name suggests otherwise, this is a jewelry company that also provides an online pawn shop service, allowing you to purchase pawned goods from this site. They sell a variety of items including musical instruments, jewelry, power tools, electronics, and more. The disadvantage of this site is that there is no simple way to pawn your items.

#4. Pawn Up

This is yet another online shop where you can pawn used items. There are a lot of electronics and jewelry in there, as well as a variety of other products. The site appears to be a little older than the others listed here, but it still functions properly. The only disadvantage of this one is that it cannot be used to purchase pawned items.

Alternatives to a Pawn Shop Loan

Fortunately, you have options other than pawnshop loans. Here are some alternatives to pawn shop loans that may be more affordable:

  • Request an extension: If you’re temporarily short on cash to pay a bill, contact your creditor to see if you can get more time to pay.
  • Bill payment assistance: Depending on your circumstances, you may be eligible for government bill payment assistance. In response to COVID-19, for example, the United States government launched several assistance programs.
  • Use a credit card: Although credit cards can have high-interest rates, if you pay off your credit card balance by the due date, you may not pay any interest. Even if you do have to pay interest, you’ll typically pay less than 30% per year, which is much less than the interest rate on many pawnshop loans.
  • Sell your item: Instead of pawning an expensive item, consider selling it to a pawn shop or an online site. You’ll have your money without having to worry about repaying it later.
  • Take out a personal loan: Personal loan interest rates are typically much lower than pawn shop interest rates. Depending on the lender, a personal loan could be funded as soon as the next business day.

What is the purpose of a pawn shop?

Pawnshops make money by making personal loans, reselling retail items, and providing ancillary services like money transfers and cellphone activation. The primary income sources for the typical pawnshop business model are interested in loans and profits on retail sales.

Why is it called a pawn shop?

The term pawn is derived from the Latin word pignus, which means “pledge,” and the items pawned to the broker are referred to as pledges or pawns. Pawnbrokers arrived in England with the Normans and the Jewish settlement.

Is it better to pawn or sell?

If you sell your item instead of pawning it, a pawn shop will usually pay you more. It does, however, depend on a few factors. For example, if you’re selling an in-demand item, such as gold jewelry or a high-end watch, the pawnbroker is more likely to offer you more money.

How do pawn shops make money on gold?

Low cost.

Pawn shops make money by purchasing items at low prices and reselling them at higher prices. Most pawn shops have significant operating costs, which affect how much they can pay for your gold.

What will pawn shops pay the most for?

Pawnshops know which items have a high resale value and are almost always looking to buy them:

  • Jewelry.
  • Precious metals.
  • Watches.
  • Firearms (registered to you) (registered to you)
  • Electronics.
  • Power tools.
  • Musical instruments.
  • Sporting goods, such as bikes.

What can you pawn for $100?

What am I able to pawn for $100?

  • Hoverboard.
  • Flat-screen TV.
  • Tablet.
  • Speakers 
  • Firearm (registered to you) (registered to you)
  • YETI cooler.
  • Apple Watch.
  • Refrigerator.

How much will a pawn shop give you for a laptop?

Here are some of the pawn values for various laptops: MacBook – $60 to $1,200. Samsung will cost between $20 and $75. HP – From $5 to $500

Will a pawn shop buy a laptop?

Yes. Taking your laptop to a pawn shop allows you to free up some cash. If you need money quickly and cannot bear the thought of losing your laptop, pawning is a viable option. Furthermore, if you decide to sell your laptop, you will most likely receive a fair price.

Can I pawn my gaming PC?

Yes. If you have the right equipment, gaming computers can sell for a lot of money. If you have an old gaming computer and need money, it may be worth trading for up to $500. Also, if you are willing to sell more computer parts, it may be worth even more money.

Can you pawn a laptop without a charger?

Ascertain that your laptop is fully charged. You don’t want to walk into a pawn shop with a dead battery. Also, don’t forget to bring your charger; you might not be able to pawn without it.


Individuals with poor credit who require only a short-term, small-dollar loan may find an online pawn shop loan appealing. However, for most people, the advantages of avoiding credit requirements and receiving cash quickly pale in comparison to the interest rates alone.

Interest rates in many states can reach 25%, not to mention the additional costs for storage and other expenses. Borrowers must not only pay high fees, but they also risk losing valuable items such as antiques and expensive electronics.

Pawn Shop FAQs

What is a pawn shop and how does it work?

You bring something you own in and use it as collateral for a loan with the pawnbroker (this act is called pawning). The pawnbroker lends you money in exchange for the collateral. You get your collateral back when you repay the loan plus interest. The pawnbroker keeps the collateral if you do not repay the loan.

How long can you pawn an item for?

The short answer is that no pawn shop holds items for the same amount of time. Pawn shops will typically hold them for at least one month (or thirty days) from the date you bring them in. The shop may also provide a grace period, but you are better off paying it within the first period if possible.

What do pawn shops take the most?

Jewelry and gold are always popular items that pawnshops purchase. You could get $100, $1,000, or more for your jewelry, coins, gemstones, or scrap metal or silver, depending on what you have. A gun, some power tools, a lawn mower, a working stereo, or a laptop computer can fetch $100 or more.

How much can you pawn a watch for?

You can expect to pay a high price for your luxury watch. At a pawn shop, popular brands such as Omega, Movado, Rado, and Breitling can easily fetch $500. Other high-end brands, such as Hublot, Rolex, IWC, Panerai, and Ulysse Nardin, can quickly fetch thousands of dollars.


1 comment
  1. Thanks for explaining how pawn loans are beneficial because a good credit score is not required. My best friend wants to get a loan to help her pay for her school tuition. She does not have a very high credit score, so I’ll recommend that she get a loan through a respectable pawn shop.

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