Recent reality TV shows like "Pawn Stars" have brought a lot attention to the pawn industry.  While the mainstream media attention may be new, the industry is not.  In fact, the history of pawn shops dates back more than 3,000 years. 

According to the History Channel, the pawn shops of today operate as mini-banks for millions of unbanked Americans and they also serve places for people of all backgrounds to buy and sell items. America’s 12,000 or so pawn shops deal with a huge variety of items including musical instruments, jewelry, and electronics. 

“Pawning” means that you give the pawn shop an item in exchange for a cash loan. For example, you might give them your mountain bike as collateral for a $75 loan.  If you repay the loan by a certain date, typically 90 to 120 days after you pawn the item, you can retrieve your bike.  The loan repayment amount will include interest and fees that are regulated by the state.  

If you don’t repay the money on time, the pawn shop takes ownership of the bike and can offer it for resale.  Most of the items pawned (about 70%) are reclaimed by their owners and according to the National Pawnbrokers Association’s 2010 Trend Survey, the average pawn loan is $100.  Pawn shops also purchase items outright to resell.

Working with a pawn shops can be a good deal for both a seller and buyer, but not always.  Following are some tips for selling and buying at a pawn shop.

Tips if you have items to pawn

1. Find the right pawn shop. Do some online research to see what others have said about working with area pawn shops.  Then, choose a reputable shop and broker you feel comfortable with.  Also, know that some pawn shops specialize in certain items.  For example, if you have an antique, look for a pawn shop that has experience buying and selling antique items.
2. Know if you want to pawn or sell.  Pawn shops will give you the choice, so educate yourself on the options and know the ups and downs of each before you go in. The decision should be based on a number of things including your ability to repay a loan and the value you place on the item you are pawning or selling.
3. Negotiate. Understand that pawn store owners are resellers, not collectors.  Just because a collector values your vintage vinyl at $100, doesn’t mean that you will get that from a pawn broker.  Set a minimum price ahead of time so you don’t make a snap decision you’ll regret later.
4. Be prepared to prove your claims.  For example, if you bring in a valuable piece of jewelry, consider having a professional jeweler write up an appraisal so you can prove the piece’s worth.  If the item runs on batteries, make sure it has fresh batteries in it so you can show that it works.  Bringing items in their original packaging is always helpful.
5. Show things in their best light.  A layer of dust might make sense on an antique, but not on your printer. Imagine that you were going to purchase the item—what would you want it to look like?
6. Pay on time.  If you pawn an item for a loan, be sure to pay back the loan plus interest and fees on time and as agreed.  Not doing so will cause you to forfeit your item or extend the loan which will carry additional charges.

Tips if you want to buy a pawned item

1. Do your research.  It doesn’t matter what an item costs when it is new; some things hold their value much more than others.  Know the value of an item in its existing condition before you make a purchase.
2. Negotiate.  Every item will have a price, but the sticker price should just be considered your starting point.  Pawnbrokers have a lot of experience negotiating, so make sure you have a limit in mind before you begin bargaining. Also, understand that, in general, the longer something stays in the store, the more the pawnbroker will be willing to lower the price.
3. Read the fine print.  Some pawn shops offer guarantees of authenticity, but others do not.  Some have lenient return polices while others say “all sales are final.”  The policies can range widely, so read the policies carefully.    
4. Pay with cash.  The pawnbroker might be more apt to take your offer if you are paying with cash.  Plus, paying with cash will assure that you don’t go over your set limit and will keep you from accruing credit card debt.

Finally, whether you’re a seller or a buyer, it is worth your time to consider your other options before going to the pawn shop.  While working with a pawn shop may be convenient, you might be able to get a better deal on Craigslist, eBay, or even in a garage sale.

Comment(s)

Paul Broni says:
July 21, 2011 11:21 AM

I have always thought that most pawn transactions (true pawn, not selling to a pawn shop) could be done away with if only people could manage their cash just a little bit better. I think there are people who just live their lives pawning and claiming the same items over and over again, all because of some minor timing differences between their cash out and their cash in. It would be nice if there were a way to counsel these people so that they could break the cycle, but I guess there's no money in that, is there...

Carl Applewhite says:
July 21, 2011 22:39 PM

I did not know about pawn shops. This will help me. Thank you!

George says:
August 13, 2011 17:44 PM

My college room-mate was always pawning stuff and reclaiming later. For him it worked well, as it probably does for many others. This advice seems good and I've never seen it on other personal financial advice sites.

TypeHere says:
February 03, 2012 04:51 AM

The effectiveness of pawning will always depend on the customer. That's all!! :)

Lawan Garris says:
September 06, 2012 20:31 PM

Can a pawn shop take your item. If you had a hold placed on it. I was given a hold date on the 20th of August 2012 for September,5 2012. When I came in on the 5th of September.The pawn shop sad they sold my item on August,22 2012. Can they just steal my item like that. I think it was a inside job. Can someone please give me some feedback on this please.

Daniel says:
April 22, 2013 19:17 PM

Probably you should pay a fee every month just to extend your pawn. Something like that may have in the contract.