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Pawn Loan Basics for Beginners

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A pawn loan can help you get out of a tight situation when your budget falls short for the month. Pawn shops are a regulated industry, so specifics on loans can vary from state to state. The following can help you understand the basics. 

Loan Basics

The loan process begins with you bringing in an item of value. Jewelry, guns, tools, and electronics are all popular items to pawn. The staff will assess the value of the item using two metrics—how likely it is you will want it back and its resale value. The more likely that you will return to pick it up, the higher the loan amount will be in regards to the resale value. 


If you don't particularly want the item back, a better option than a loan is to sell the item outright to the pawn shop. This will allow you to negotiate the price, keeping in mind that the shop will want to sell below full resale value so they can make some profit. You also won't have to worry about interest payments if you decide to sell outright as opposed to taking a pawn loan.


Pawn shops use several different means to determine the value of the item. They will look at valuation guides and compare that against sales histories of similar items from their own shop. They will also consider the quality and condition of the item. Your history with the pawn shop may also come into play. If this is your first loan, you may be offered a smaller amount until you have a history of repayment.

Basic Terms

Terms can vary greatly, but most loans require payment within 14–30 days of issuance. At that time, you could pay back the loan in full, or pay the interest and renew the loan. Interest terms can also vary greatly, as these are usually capped by law so they are specific to each state or municipality. 

Item Forfeiture

If you don't pay off or renew your loan, you forfeit the item. This means the pawn shop forgives the loan and takes ownership of the item, which they will then resell. You cannot redeem the item after it has been forfeited, the only option is to buy it back at the shop's price. Repeated forfeiture may affect your ability to get a loan from that shop in the future.

 Contact a pawn shop to learn more about pawn loans in your area.