A pawn shop is quite possibly one of the most misunderstood business models around. When people think of a pawn shop, one thing usually comes to mind: crime! Although the pawn industry does have more than its fair share of bad apples, it’s by no means a criminal’s paradise. In fact, pawn shops have a long and reputable history of helping people and businesses in financial distress.

Pawn Shop Definition

A pawn shop is a business that offers loans on items that are not accepted as collateral by traditional banks. Loans amounts are usually determined by an item’s market value and are expected to be repaid within a specified time frame. If the loan is not repaid (with interest), the borrower’s collateral will be liquidated to recoup any losses incurred by default.

In Layman’s Terms

A pawn shop is a place that will give you quick cash (in the form of a loan) for household items like jewelry, electronics and collectibles. When you pawn an item, the pawnbroker holds your item as collateral until you repay the loan plus interest. If you fail to repay the loan, the pawnbroker will sell your item to someone else and recoup his losses.