Pawnshop Loans

The local pawn shop industry has thrived for thousands of years helping Americans get short term loans. Yet so many people still wonder how do pawn shops work?

Short answer: A pawn shop is a licensed and regulated broker that offers consumer credit (fast loans) secured by personal property. The loans are instant and do not improve or impair credit scores.

The selling point is that these loans are obtained quickly without any credit checks, lengthy application processes, or waiting periods. They give cash on-site based on the collateral you are willing to hand over.

Back in the day with no help from media portrayals, pawnshops appeared to be dark, dingy, and dodgy places. Do you remember the 2013 movie Hustlers? No, not many people do.

Elijah Wood and Paul Walker were among the star-studded lineup. It’s a twisted tale set in a small southern town pawnshop where bad things happen.

The reviews were not good! Stephen Holden from the New York Times rated it a 1/5 and said it was, “A hillbilly grindhouse yawp of a movie that belches in your face and leaves a sour stink.” Yikes!

Movies like this cement the concept in our minds that pawnshops are dark, grimy unregulated local stores where shady things can happen. This is not the case.

Rules and Regulations

These days the pawn America industry has numerous state and local laws they must adhere to, as well as 15 federal statutes and regulations.

They have to supply local law enforcement with transactional data regularly. The data information is to ensure they are not purchasing or pawning stolen goods.

They have a Nation Pawn Association (NPA), which helps local owners keep up to date with regulatory requirements as well as providing other business support.

All NPA members are committed to operating their business in a way that promotes a positive and professional image of the industry.

With over 10,000 establishments across the country, the pawnshop industry is a thriving and somewhat shiny and welcoming place to do business.

FACT: According to NPA statistics, 85% are family-owned independent small businesses.
Source: Nation Pawn Association

Ok, so we now know the industry is legitimate.

How do Pawnshop Loans work?

If you need small amounts of money in a hurry, on the spot, you can take something of value that you own to a pawn shop near you.

They prefer appreciating items such as jewelry, coins, and firearms.

FACT: Pawn shops are required by law to confirm ownership of goods and will ask to see proof of government-issued ID.

The local pawn shop will lend you money based on the collateral of your item. There is a catch. Pawnbrokers don’t give you what the item is worth but rather a fraction of the value.

The pawnbroker keeps the item until you return to pay the loan back, as well as the fees and interest associated with using the service.

Interest usually accumulates over a standard 30-day period. Rates differ depending on the value of the loan. There are also transaction fees associated with the agreement.

FACT: The average loan is $150

If you need a more substantial loan amount, consider an online loan.

Once you have agreed on the loan, the pawnbroker gives you a ‘pawn ticket.’ It is basically a receipt and terms of the agreement all in one.

Don’t lose your ticket!

It is crucial not to lose the ticket at a local pawn shop. To get your collateral back, you need to produce your ticket. The ticket will have the terms of the agreement on it. It will outline vital information such as when you need to collect your goods, when you need to repay the loan, and the fees associated with the collection.

The standard loan duration is 30 days. Some brokers offer an ability to extend the loan by 30-day increments if the fees and interest are being paid regularly.

Local pawnshops will consider buying your item outright if you do not want to pawn it. You will get more for your goods this way. But you don’t get them back! Some stores are hesitant to oblige in purchasing products outright as they make more money from pawning.

If they agree to purchase your goods, then it is a straightforward sale and purchase, and there is no loan agreement involved.

At the end of your loan term, go and collect your collateral. Upon payment, you will receive your goods this is standard for the pawn America industry.

You are expected to pay the loan, interest, and fees. If you are late for collection, you will incur late penalty fees.

If you don’t return for collection, once the term of the agreement is over, the pawnshop legally owns your goods!

FACT: Over 7% of American households have used a pawnbroker

Pawnshop loans are pretty straight forward. As with anything, there are positives and negatives in using their services for borrowing money.

Pros and Cons with Pawnshop Loans

Here is a quick pros and cons summary to keep in mind when loaning from a pawnshop.



  • If you fault your loan, you lose your goods
  • They charge substantial fee’s
  • You’re pawning high-value items for low-value loans
  • Standard loan repayment is 30 days


If you want to keep your goods, consider applying for a loan online. Many of our loan providers offer quick application processing times and bad credit options.  Our free online comparison tool is a fast way to shop for hyper-competitive and legitimate loans online. In most cases, online loans offer a lower interest rate and fees than pawn shops.

If you want to sell your goods, try selling them on eBay or Craigslist. You will most likely get more for the item than what a pawnshop is willing to pay.

>> gives you 12 ways to get money now.

We hope you’ve enjoyed this read, and if you find some value, please comment below.

Author Kimberley Smyth

Kimberley is the US Country Manager for She has gained years of experience in small business management and has two successful start-ups under her belt. She now focuses her energy on helping others achieve financial freedom through smart money management and investment opportunities.

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Last Updated: June 1, 2021

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