A pawn shop provides small loans to people in their community. These are usually people who need funds to make it to the next paycheck, families seeking money to pay a bill, or small business owners trying to meet payroll. The average pawn loan is around $150, according to the National Pawnbrokers Association.

The loans a pawn shop provides are called collateral loans, because they are based on collateral, or an item that an individual turns over to the shop in order to obtain the funds. An individual turns over a valuable item, such as gold jewelry or a vintage guitar. A pawn shop employee will appraise the item and offer a loan to the individual secured by the collateral. The amount of the loan is a percentage of the value of the item, because the pawn shop must account for storage costs as well as the future potential to sell the item. A valid ID is needed to put up an item for a collateral loan.

The pawn shop holds onto the item until the loan is repaid. If the loan is paid in full, the pawn shop will return the item. If it is unpaid, the pawn shop will retain and sell the item.

Approximately 85 percent of pawn loans are repaid, according to NPA. Pawn loans never affect a consumer’s credit.

Pawn stores are strictly regulated by federal, state and local laws.

There are more than 13,000 pawn shops in the United States today. Many are small, independent businesses that are family owned and operated. Come ask us directly your questions about pawn shops.