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How Do Pawn Shops Work? This Is What You Need to Know

Are you wondering how do pawn shops work? If yes, you should check out our guide here on the important things to understand.

For much of human history, people have needed emergency loans. And for thousands of years, many people have turned to pawn shops to help them out. Unfortunately, pawn shops tend to get a bad rap despite the fact that they can be an efficient way for people to get cash fast.

But just how do pawn shops work? And should you consider going to one in order to get a quick loan? Continue reading and we’ll walk you through everything you need to know.

What Is a Pawn Shop?

If you need some quick cash, you can go to a pawn shop and either sell items or leave them as collateral for a loan. As a buyer, you can find some great deals for a variety of things.

Many pawn shops also tend to specialize in certain items. For example, one pawn shop might specialize in guns, while another will specialize in musical instruments, and another will mainly deal with cars and motorcycles. 

This makes sense considering the vast regional differences when it comes to which items are most frequently pawned. For example, vehicles are frequently pawned in states like Florida and Colorado while many southern and western states tend to pawn firearms. 

How Do Pawn Shops Work?

Probably the aspect of pawn shops that people are most confused by is the loan process. Many people assume that you simply sell an item to a pawn shop, receive your cash, and the transaction is then over. This isn’t always the case, however. 

Pawn shops are great for people who need specific and uncommon loans quickly. For example, if you needed a $100 loan for a couple of weeks, you’d probably be laughed right out of the bank. In a pawn shop, things work a little differently.

A big part of what a pawn shop does is loan people money. You bring items in for collateral and the pawn shop will give you a loan in return. There is also no credit check involved, which is another big selling point for pawn shops. 

Essentially, you bring your item into a pawn shop and then tell the broker how much money you need. If the pawnbroker decides that the value of the item is equal to or greater than the loan amount, they will likely loan you the money while holding onto the item as collateral. 

How the Loan Works

Every state is different. But in a place like Florida, your loan would typically last for thirty days.

After the first thirty days are up, you’ll automatically fall into a thirty-day grace period. This means that you’ll have sixty days to either pick up your item or come in and pay the interest on the item and extend it for another thirty days.

Imagine that you were to bring in a guitar that cost $200 and you asked for a $100 loan. The pawnbroker would take the guitar and put it in their vault. They would then give you the $100 and send you on your way.

There’s no recourse to this kind of loan. You can come back the next day, thirty days later, or even sixty days later. As long as you pay back the loan and the interest owed, you will be given your property back. 

Typically, you’ll owe less in interest if you come back at an earlier date than a later one. These kinds of loans can solve a lot of problems, especially if you’ve ever experienced bouncing a check or if you’re worried about keeping your lights on. 


There is a lot of paperwork that a pawnbroker has to complete for every item that they receive. There a few reasons for this. First of all, a pawnbroker needs to submit a list of all of the items that they receive, serial numbers included, to the police. 

The police will then take these serial numbers and compare them against records of stolen goods. Anything that was stolen is recovered and returned to the proper owner. 

The reason for this is that a pawnbroker can be charged with receiving stolen items if they don’t submit the proper paperwork. This also helps to disincentivize people from stealing items and then pawning them off for money.

How Pawn Car Loans Work

One of the most common pawn items is cars. It should be noted that pawning a car is different than pawning a car title. When you pawn a car, you have to leave your car with the pawn shop.

When you pawn a car title, you still get to drive your car throughout the duration of the loan. When you pawn a car, you’re also going to have to make sure that you have a clear title, which means that there aren’t any liens against it. 

If you’re someone who doesn’t drive that often, has a clear title, and needs cash quickly, a car loan could be just what you’re looking for. If you want to learn more about car pawn loans, you can check out this helpful guide for more.

The Importance of Knowing About Pawn Shops

Pawn shops provide an important and vital service to many people who normally can’t get a loan at a typical bank. By understanding how do pawn shops work, you can perhaps get a loan for yourself that you normally wouldn’t be able to obtain. Either way, you’ll now have the ability to make more informed and confident financial decisions and expand your options when it comes to getting cash quickly.

Are you looking for other helpful financial articles like this one? If so, then make sure to check out the rest of our blog today!


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