Pawn shops are a necessary business that can make a huge difference for the people that use them. Pawn shops have been around for centuries and are a great way to get some money for unwanted items you may have lying around the house or get a loan when you are hard up for money.
How Do Pawnshops Work?
Pawn shops work on the principle of collateral. You take an item to the pawn shop, and they will then offer you a sum of money based on how much they could sell the item for if you default on the loan they offered you. You will take an item in, and they will offer you a sum. You can either agree and take the money and enter the item into pawn, or you can deny it and take it home.
Pawn shops can offer you two types of money, a flat-out purchase of an item where they buy it from you and then sell it on the sales floor. Or a pawn loan where you have the ability to come back and get the item. With items that you are outright selling, you are often going to get a fraction of the face value so that the pawn shop can sell it, and you can both make some money.
How Do Pawn Loans Work?
Pawn loans work on the principle of collateral and interest. A great way to better understand is to look at an example. Say you have a gold watch that is worth $500. You take it to the pawn shop so that you can pawn it. The pawn shop is not going to offer you the full $500, as they do have to be able to resell it for a profit if you default on the loan.
They might offer you $250 for the watch. You can accept the amount and then take the money and the item will be entered into pawn. The pawn loan is going to have an interest amount and a term. This means you have a specific amount of time to pay back the initial loan plus interest or the watch will then be the property of the pawnshop for them to sell.
You can also come back and get the item, pay the pawn loan off and the interest and then take your item back. If you do not pay the pawn loan, the item becomes the property of the pawn shop, and they can then sell it on the sales floor to try and recoup their money.
The pawn shop will not put the item on the sales floor until the amount of time has passed and until the item belongs to the shop to sell. This is a great way to get some money if you need it fast, and you do not have another means of getting it, or if you have unwanted items that you simply want cash for.
Harrison Street Pawn and Gun of Paola, KS is happy to answer any of your questions regarding how pawn shop loans work.