Pawn Shops: They're Not What You Think They Are

Most people have a basic idea of what a pawn shop is. However, they may not be familiar with the services that a pawn shop can offer. There are even a few myths that regularly circulate about pawn shops, which are cleared up below.

Pawn shops will return your items when you return your loan.

When you take something to the pawn shop, they pay you and keep the item. And you have a certain period of time to bring back the money — with interest — and get the item back. For some reason, people assume that the pawn shop would prefer to keep the items they have as collateral on your loan. But actually, pawn shops do better when their debtors actually do return for the items. They make money on the interest, and they don't have to put the time and energy into selling the item! 

Pawn shops have regulations and restrictions, like any other business.

There are actually a lot of regulations restricting how pawn shops can operate. They can only charge certain interest rates. (The exact rate varies by state.) They are required to be licensed and to pass certain inspections.

Pawn shops sell items left behind as collateral.

Pawn shops take items as collateral on loans that people get and are allowed to sell the items to the public if the debtor does not return their money. Pawn shops do not knowingly buy stolen items. Most actually have a close relationship with the police and report any items they think may be stolen. Many criminals do try to sell stolen items at pawn shops, so a lot of them are actually caught this way.

Pawn shops price items according to their worth and according to market trends.

Yes, pawn brokers want to earn as much as they can for the items they sell. As such, they price those items on the higher end of what they think they can expect to get. But this is because they expect buyers to negotiate. If you walk in and see a ring for $120, but you can only afford $100, make an offer. In most cases, if your offer is reasonable, it will be accepted. Pawn shops are actually really good places to score a deal if you know how to negotiate.

Pawn shops don't always have the best reputation, but that's really not deserved — it's based on myth. These businesses can help you out whether you're looking for a short-term loan or you're looking to buy something.