Pawn Shop

A pawn shop is a place where loans are offered to those in financial distress. Money is lent and valuable items are traded in. These items are those that banks could not consider as collateral such as jewelry, electronics, equipment, and more. The valuables are returned upon repayment of the loan. The traded item is called a pawn. 

A pawn shop can be considered as a sort of microfinance institution that aids the lower financial class. It has very high-interest rates but is also a great go-to for quick cash. 

A pawn shop also buys merchandise from those in financial distress. They gauge the value of the item and pay money worth. 

How it works 

A pawn shop is run by a pawnbroker. The loanee takes the items to the pawnshop and requests a loan amount. The pawnbroker evaluates the value of items against the requested amount to determine whether it is feasible. Once it is approved, the loanee receives the loan amount. The loan has a time limit and once the limit is up, it is extended for an equal grace period. At this point, the loanee has two options, to pay the interest amount and extend the period or to fully repay the loan. The interest amount varies with the period taken to repay the loan. The pawns are retrieved upon the full repayment of the loan. The collected items are resold if the loanee defaults in payment for way too long. 

In the second instance, the seller’s item is simply gauged and they are paid the value of the pawns. 


  1.   It is a quick way to get money-You will normally have the cash the same day. 
  1.   It is a great option for those with poor credit history-Your credit history can adversely affect your borrowing. Pawnbrokers rarely look at credit history which makes it an ideal option. 
  1.   You are allowed to retrieve your items at any time. The interest charged is solely dependent on the period you have had the loan. 
  1.   When your item is sold for an amount lesser than the loan amount, you will not be charged for the outstanding amount. 
  1. There is room for negotiation on the best price for items traded-in. The rapport created is very crucial. 


  1.   Borrowing from a pawn shop can be relatively expensive due to the high-interest rates. 
  1.   Reselling an item at a pawn shop can be a loss-The pawnbroker can sometimes purchase your item at a lesser price than the buying price. Pawnbrokers factor in polishing the item and paying labor for reselling of the item. It is one of the ways they earn for themselves. 

How it  helps 

  1. They offer financial services for those not favored with the banking sector. 
  1. It is ideal for emergency cash needs. 
  1. The pressure to repay the money lent is relatively lower than that of formal financial institutions. 


Pawn shops are a great alternative for emergency financial needs Value pawn & jewelry