How does a Pawn shop work?

This basic information is taken from Wikipedia, the free online encyclopedia:

 "A pawnbroker offers monetary loans in exchange for an item of value to the given pawn broker. The word pawn is derived from the Latin pignus, for pledge, and the items having been pawned to the broker are themselves called pledges or pawns, or simply the collateral."

How the pawning process works:

Within a certain contractual period of time, the pawner of an item may purchase it back for the amount of the loan plus some agreed upon fee. If the time elapses without payment, the pawnbroker is allowed to sell the pledged item to recoup the amount of the loan, which may have only been a fraction of its actual market value. Pawnbrokers often have a large number of formerly pawned objects for sale at their place of business, called a pawnshop, whereby they may recoup money that had been loaned out on an item subsequently forfeited by a pawn customer.

Pawnbrokers can also purchase an item outright for cash with no repayment expected; these sometimes need to be held for up to 30 days by law before they can be offered for sale. Because of the risk to the pawnbroker of receiving stolen property, and the interests of the community in not allowing a legitimate businessman to act as a fence, laws to protect both these parties exist in some jurisdictions in the United States through the means of a hold placed on an item purchased by a pawnbroker. If a hold law is in effect, it will last up to approximately 30 days, depending on location.

Items of value:

Pawnbrokers are often willing to take in many different types of items including jewelry, electronics, musical instruments, and tools. Gold is considered an item that is never to be turned away, because even if the item is of relatively low value it can still be sold in bulk to a smelter as scrap gold.

Please note: There are many things that are taken into consideration when a Pawn shop is considering the value of an item or object, and every shop will be different. For more detailed info on how it works with us, please see our FAQ area.

 When an item is pawned the pawn broker will typically loan out however much money the customer needs, though considerably less than the resale value of the collateral. Of course no pawnbroker is going to loan more than the value of an item being pledged and in most all cases it will be a fraction of the value. This is so the pawnbroker can make money on the item in the event the customer doesn't come back for the item and the pawnbroker must resell it.

The required time between forfeiture and sale of an item is usually 30 days. For some items, such as electronics that drop in value as new and improved models come out, pawnbrokers must offer a lower loan to be certain that they can recover the costs associated with the loan while making a profit. Other items, such as gold, must be valued in keeping with the daily fluctuations in market value.

 

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