A pawnbroker’s bread and butter is the pawn loan. Pawn loans are collateral loans in which the customer brings in an item of value which they use to secure a loan. During the loan period, customers leave their item in the pawnbroker’s possession. The dollar amount of the pawn loan is based on the value of the item, with the dollar amount being a percentage of the estimated worth.
Once the loan, interest and fees are paid back to the pawnbroker, the customer receives his or her item back. While the bulk of business done at a pawn shop is collateral lending, pawn shops also offer retail services. The merchandise lining a pawn shop’s shelves comes mostly from purchased items, or items that were left by customers who, for whatever reason, did not repay their loan.
Shoppers will find low prices often on luxury items. Pawn shops are a major resource for consumers needing small dollar loans for emergencies as well as for consumers simply looking to sell or purchase jewelry and other high-end retail items for a fair price. Bank loans come with paperwork, hassle, cannot be found in small dollar amounts and can negatively affect your credit. Pawn shops, however, give consumers another option to get cash in times of need. Most importantly, a pawn loan can never affect your credit, even if you do not repay your loan.