There are over 9,000 pawn shops in the United States. And yet, despite their prevalence, there are many people who still don’t know the difference between selling and pawning. Much of this could be due to the many television shows, like Hard Core Pawn and Pawn Stars, that really only show the selling aspect of pawnshops.

Despite what the public may think, pawnbrokers really make their living through loans. But how do pawn loans work? And what makes them different from selling?

Continue reading and we’ll walk you through everything you need to know!

What Is a Pawn Shop?

Pawnshops have been around for a very long time. Essentially, for as long as humans have needed emergency loans, there have been pawnbrokers to supply them. A pawnshop serves several functions.

First, a pawnshop offers great deals on a variety of items and products that buyers would find enticing. Second, a pawnshop buys items from independent sellers in order to resell them.

Lastly, a pawnshop offers loans by taking collateral. Let’s diver further into that below.

The Difference Between Selling and Pawning

Selling is a fairly simple concept for people to understand. A person goes into a pawnshop with a gun or a guitar or some other item and sells it to the pawnbroker. They will usually tell the broker how much they want for it and then the broker will decide if they can pay that much and still make enough of a profit.

If they find the asking price too high, they’ll make a counteroffer. Eventually, if they agree on a price, the individual will sell the item to the broker and then be paid in cash. The seller will then leave and the transaction will be over.

Pawning works differently. When it comes to pawning, a person goes to a broker with an item and asks for a loan. Similar to the selling scenario, the customer will ask for a certain amount of money, and if the broker believes that the item is worth that much, they will agree to lend the customer the money.

The broker then takes the item and puts it in their vault, where it will be until the owner picks it back up. The broker will then give the customer the loan. Loan terms differ by state, but in a state like Florida, the loan term lasts for thirty days.

After those thirty days are up, there is usually a grace period of another thirty days. By that time, the customer needs to come back and pay back the loan and pay the interest too. Once they do that, they’ll get their merchandise back.

There is no recourse if a person can’t pay back the loan. The broker simply keeps the item and then puts it up for resale.

Why Get a Pawn Loan?

There is a stigma around pawnshops that they’re shady places and may not be fully legitimate. However, a valid pawnshop is a legitimate business and can offer unique and helpful loans. There are also several reasons why you might want to get a loan from a pawnshop as opposed to a bank or other traditional financial institution.

First off, pawnshops deal in all sizes of loans. If you try to go to a bank and ask to be given a $100 for a couple of weeks, you’ll probably be given strange looks and then be quickly escorted right out of the building. A pawnbroker works differently.

As long as you present them with collateral that’s worth more than $100, then there shouldn’t be a problem with you securing a loan. And if you bring the money back within a few hours, or even sometimes the next day, you might not even have to pay any interest.

Another big benefit of getting a pawn loan is that they won’t check your credit. Pawn loans are extremely helpful for people who have experienced a bounced check or are just trying to keep the water on in their house.

By knowing how a pawn shop works, you can end up with a loan that you normally wouldn’t be able to get.


Pawnbrokers have to complete a lot of paperwork for every piece of merchandise that they get, whether the item is sold or pawned. There are a few reasons for this. First of all, it’s to make sure that you aren’t pawning off any items that you might have stolen.

A pawnbroker has to submit a list of everything that they receive to the police. They include any serial numbers too. The cops will then run the serial numbers and item descriptions against their records of stolen items.

If they find that the pawnbroker has anything that’s stolen, they’ll recover those items and return them to their rightful owners. If a pawnbroker doesn’t make this report and ends up with a stolen item, they can face legal action.

A pawnbroker also needs to make sure that they don’t accidentally put anything on the floor to be sold before the loan term is up.

The Importance of Knowing the Difference Between Selling and Pawning

After reading the above, you hopefully now understand that there’s a big difference between selling and pawning. And by knowing what pawning is and what it entails, you can expand your financial possibilities the next time you find yourself in a tight spot. Just make sure to read over all of your contracts and the terms of the loan before you sign anything.

Are you looking for other helpful articles like this one? If so, then make sure to check out the rest of our blog today!