How Pawn Shops Work – The Basics Of Cash Loans

Brian McCracken


People often want to know how pawn shops work and this tutorial is going to give you the great insight that you have been looking for into the pawn industry. Pawning something at a pawn shop isn’t difficult. In fact, it’s probably one of the easiest things that you can do to come up with cash quickly that won’t cost you and arm and a leg down the road.

Pawn shops work by making people loans against their merchandise and holding onto it for a specific period of time.
When the person is able to come back and pay the balance of the loan, the pawn shop gives them back their merchandise in the exact same condition that they left it in. Of course, pawn shops will also offer to buy your items should you want to sell them instead.

The prices that they pay for your items will depend on a variety of elements, such as what condition the items are in or how complete they are. If it’s something like a piece of gold jewelry, it might also depend on the weight of the item as well as the size and clarity of any diamonds involved. Let’s cover the basics.

By simply being prepared before you go into a pawn shop, you are more likely to walk out with more money than had you given no thought to what you were taking into them to begin with.

What To Do Before Going To The Pawn Shop

It’s best to have a game plan for what you are going to take to a pawn shop and what kind of condition it should be in. By spending a minute or two thinking about it before you pack up and go, you will give yourself the best chance of making sure that the pawn shop will give you a loan on your items, and furthermore, that you will get the most out of those items possible.

Let’s talk about three simple things you can do before you leave your house to be sure that you get the most money possible from a pawn shop.

1. Ensure Your Item(s) are Clean

Before you head off to the pawn shop, it’s a good idea to make sure that your item(s) are clean or in otherwise good condition. Pawn shops look at items as if they may one day be in the position of having to resell them. Customers don’t want to buy something that is badly damaged, extremely dirty, heavily marked up or otherwise flawed, so pawn shops don’t pay as much for items in that condition.

By having your items in the best condition possible beforehand, you are likely to find the pawn broker much more willing to work with you on borrowing as much money as possible against whatever collateral you have brought in.

2. Ensure You Have all The Parts and Accessories

Much like the condition of an item, the pawn broker is going to be looking at the items you bring in for a loan as if they may have to turn around and sell them one day. Their customers won’t be too excited to buy something that’s missing parts and because of that, pawn brokers don’t pay as much as they might when you take something into them that is incomplete.

3. If Your Item Has Batteries Ensure They are Charged

This helps the pawn broker verify that everything works as it should. If he or she can’t see that your item works as it should and that the batteries hold a charge, they know that it will be tough for them to try to sell it down the road should you end up forfeiting the loan. Because of that, pawn brokers want to see that the items you are bring in work just like they should.

Following these simple steps will likely get you a higher offer than if you hadn’t done these things as you will be presenting your item(s) in the best possible condition.

Pawn shops evaluate jewelry based on the spot price of the metal and the strength of the diamond market if there are diamonds in your item(s). Pawn shops only consider the true or ‘real’ value of a piece of jewelry; the retail or appraisal prices mean nothing as they aren’t reflective of an item’s actual value.

How Do Pawn Shops Evaluate Jewelry?

In the case of jewelry, if your items are very nice pieces, then you will want to take any certifications or appraisals with you. These will help you demonstrate to the pawn shop what grade and quality the stones are, the exact size of the stones in the jewelry, and precisely what the metal is that was used to make the jewelry.

It’s important to remember that if you have an appraisal, whatever value that appraisal places on the items is not the true value of them and not what the pawn shop will base their cash loan off of. Those appraisal values are based on replacing the items at retail cost. Pawn shops don’t deal in retail costs, they look at the actual or ‘Real’ value of the metal and diamonds involved.

That is to say, a pawn shop looks at the spot price of the metal based on it’s weight and purity. They look at the diamonds individual value based on the open diamond market and how weak or strong it is at the time that you make the loan.

What to Take to The Pawn Shop

The items that you take into a pawn shop should have some significant value on the used marketplace. That can mean things like:
– Power Tools and Hand Tools
– Consumer Electronics
– Fine and Gold Jewelry
– Musical Instruments

While yes, we all know how much something may have cost when it was new, whatever items you are taking into the pawn shop are no longer new. If a pawn shops is in the position of having to resell them at one point, they will have to consider the current used value for the items as well as what the future demand will be for them.

Because of that, items that were made by ‘off-brand’ or less desirable brands are not as likely to get as much money as items that are made by high quality manufacturers. For instance, a Black & Decker drill that you can buy at Walmart isn’t going to worth nearly as much money as a premium Milwaukee Lithium Ion Hammer Drill.

When it comes to electronics, you will want to make sure that yours are clean and working properly before you take them into the pawn shop. Once you understand how pawn shops work, you will understand that pawn shops are there to help customers, but they have to look at every item as if they may be in the position of having to resell the items that come in at some point in time.

How Pawn Shops Work With Electronics

Things like electronics do not hold their value well. Digital cameras are constantly replaced by newer, nicer models. TVs don’t age well for the same reason. Additionally, if the type of product that you bring in has a large number of lower priced competitors in that market, the value of your item will be negatively affected as well since pricing it used will have to take into consideration the demand for that specific model versus it’s competitors which may be much more affordable.

Typically speaking, with electronics, unless the item is truly unique, it’s going to be mass priced at a similar level to what electronics with similar features have sold for. In other words, two TVs from brand name manufacturers that are the same size, with the same quality picture and the same features will get roughly the same amount of money, even if one of those TVs was slightly more expensive when it was new.

How Pawn Shops Work With Jewelry

Ideally, items that are made out of precious metals such as gold or silver will often be your best bet as their value is established by a world-wide market. That price will move some every day, but typically speaking, it is pretty easy for a pawn shop to determine exactly what you item may be worth and therefore, how much they can turn around and sell it for in the future should you forfeit your loan.

When it comes to precious metals, a pawn shop will determine how much your item(s) weight, what the purity of the metal is, deduct any weight from stones of other non-precious metals, and make you an offer based on a percentage of the current market spot price of that metal.

As a word of caution, jewelry that contains semi-precious stones of many very small diamonds won’t have any or any significant value over the weight of the gold or silver itself. Semi-precious stones have very little demand for them and small diamonds aren’t highly sought after either.

Diamonds actually only get more desirable at around 1/2 carat or larger per stone, assuming that it is round or princess cut. Marquis shaped diamonds don’t have any significant demand no matter what size they are at this point. If your items have diamonds, the diamonds will be priced in accordance with current market demand for stones of similar cut, carat, color, and clarity.

Once you learn how pawn shops work, you will understand that much of the time a pawn broker spends in his or her shop is evaluating items that come in. Often times, they will consult sites like eBay or Amazon to see what similar items have sold for recently that are in similar condition and completeness as yours. Understanding how pawn shops evaluate items will put you far ahead of everyone else when it comes to getting the most money out of you bring in.

How Do Pawn Shops Determine Value?

When making a loan at a pawn shop, you are exempt to get a portion of the items value. You have to remember that the pawn shop isn’t buying your item, it is still yours. They are just holding onto it until you come back to pay off the loan and get your item back.

That having been said, during that process, a pawn shop does have to consider what will happen if they have to resell the item. Things like future demand, storage costs, reconditioning or repair, and general bookkeeping costs all go into this determination on how much a pawn shop can loan you for your items.

As a general rule of thumb, you can reasonably expect to be offered between 40-60% of the items current resale value when compared to other similar items in like condition and completeness.

Read more: How Pawn shops Determine Value

How Do Cash Loans At Pawn Shops Work?

Pawn shops are regulated on federal, state and local levels. With each additional set of laws that regulate the pawn shops in your areas. Each of  these laws are set by local regulators and not being a federal legal presence and therefore there is no one giant giant that specifies that specifics of pawn rules throughout the country as they are constantly changing.  Because of that, we will look at the interest charges and holding periods in two specific sections.

How Do Pawn Shops Work With Interest?

For instance, in a state like Ohio, the cost of a pawn loan is 5% interest per month, plus $4 storage per month. In other words, if you were to barrow $300, it would cost you $19 per month. When you compare that to the cost of a disconnection fee, late fee, called of day of work, or shut off, you can see that pawn shops are a very affordable option to help you get through whatever rough spot you may current be going through.

To determine the exact amounts that pawn shops in your area charge, it would be best to look them up on and call them. They get this question several times a day and will have no problem telling you what the laws in their area require them to charge for making pawn loans.

When making a loan at a pawn shop, a lot of people will ask how long pawn shops hold onto their items for. This can vary by state-to-state and city-to-city as these time periods are based on state and local laws within which the pawn shop operates. That having been said, you will typically have between 30 and 180 days to come back and get your items, assuming that you never extended your pawn loan.

How Long Do Pawn Shops Hold Onto My Stuff For?

This is another question that is going to be determined by you state and local laws as they are what set the guidelines that pawn shops have to follow when making pawn loans for customers. Typically speaking, most states offer their customers a minimum of 2 months to redeem whatever items that they had put into a pawn loan at a local pawn shop.

That having been said, some states only require that the items be held for 30 days, while other states go further and have made it the law that pawn shop much hold onto your items for 3, 4, or more months. Again, in order to really determine the best answer for how long pawn shops much hold onto your items, it’s best just to go to and search the phrase “Pawn shops in my area” and call a few of the pawn shops in your city. Ask them how long a pawn loan is good for and if you can renew or pay on the loan to extend it in the future. They will have no problem answering this question as it is one that they get all of the time, I assure you.

Read more: How Long Pawn Shops Hold Onto Items For

How Do Pawn Shops Work With Extending Loans?

Yes, should you be in the position of having to extend your loan to prevent the pawn shop from forfeiting your item, just about every state has a mechanism for doing this. In some states, it’s considered simply an ‘Extension.’ That is, where you pay for a certain past due period of time before the loan expires and then the loan is extended whatever the length of time that you paid was.

So for instance, if your loan is good for 90 days and you come in on the 90th day and pay the past 90 days due interest and storage, your loan will then be extended another 90 days before they will forfeit your items. This allows you to keep your items safe from being pulled by the pawn shop and gives you additional time to come up with the money to pay the principle of the pawn loan in addition to the interest.

In some states, you may have to do what is known as a ‘rewrite’ of the loan, but the process is basically the same other than that your loan will be given a new number and a new pawn ticket will be given to you. Failing those options, some pawn shops will let you simply ‘repawn’ the item. Repawning an item is where you get the item out, then immediately put it back in. So if you borrowed $100 and the interest was $9, you would pay the pawn shop $109.

But if you don’t have the $100 to spare and need it to make a bill payment of some sort, they will put the item right back in pawn and hand you back the $100, meaning that you’ve effectively only paid $9 for additional length in time before they forfeit the loan which will allow you to come back and get it at a later date.

Once you understand how pawn shops work, you will see that pawn shop and police departments work very closely together to keep the bad guys and stolen merchandise out of pawn shops. Pawn shops and police departments typically have very good relationships as they both share the same goals of keeping thieves in jail and returning stolen merchandise to its rightful owner.

How Do Pawn Shops Work With Police?

Pawn shops typically have very good relationships with the police departments in their areas. Pawn shops don’t want stolen merchandise in their stores and will often report bad guys that they think may be trying to sell or pawn stolen items.
Additionally, pawn shops report to their local police departments on a regular basis so that the police know what is coming into the stores and who is bringing it in.

Just the same, police departments tell the local pawn shops in their areas what have been recently stolen from cars, businesses and homes so that the pawn shop can be on the lookout for those items. Depending on what the victim in the case wants, the pawn shop may be asked to specifically try to buy those stolen items so that the bad guys can be identified and the property be returned to it’s rightful owners.

Do Pawn Shops Affect Credit?

No, pawn shops do not affect your credit. When you pawn an item, if you forfeit the items by defaulting on the loan, then the loan is considered to be ‘paid in full.’ That is to say that there is no reason for the pawn shop to file a claim that you somehow owe them more money. Once your item is legally turned over to them to resell, you have no further obligation to the loan or any financial interest in that loan or the item that was used to secure it.

Do Pawn Shops Cash Checks?

While it is not incredibly common, there are many pawn shops out there that do also operate as check cashiers and will cash your check. They typically only deal with payroll, insurance, government and similar checks. They will not typically accept person checks under any condition. Those you will have to take to the bank to deposit. That having been said, the charges that pawn shops charge for cashing checks are normally very low when compared to other check cashiers because it’s only a part of their overall business where as check cashiers have to depend solely on how much they charge their customers for cashing checks to survive.

Read more: How Does Check Cashing Work

Do Pawn Shops Do Title Loans?

Some pawn shops will do title loans, but this is another issue that is going to depend on the state and local laws concerning how title loans are to be done and what has to happen to the vehicles involved. In many states, when a pawn shop makes a loan, they have to maintain possession of the item, on premises. that means that if they were to make you a loan on the title of your car, they would need to keep the car safe and locked up in either a warehouse or fenced in area.

Unfortunately, not all pawn shops have that space or ability and therefore, not all pawn shop that could legally do title loans will do them. That having been said, if you are looking for a loan on your vehicle, a pawn shop will likely always be the better option over the more questionable consumer title loans that have recently became to pop up in urban areas as the interest rates they charge are extremely aggressive in comparison to the lower interest rates charged by pawn shops.

Do Pawn Shops Need ID?

Yes, if you are going into a pawn shop to get a loan or sell something, then you will definitely need to bring the appropriate form of ID with you in order to complete that transaction. What type of ID you need will be determined by the state and local laws in your areas. Some states only require a ‘Photo ID’ while other states require that the ID be a state ID or some sort and further more, some cities require that a fingerprint do along with it.

It’s best to search for local pawn shops and ask them specifically what you need to bring with you in order to make a loan. They will appreciate the fact that you are thinking ahead and will have no problem answering this question for you.

Do Pawn Shops Trade?

In some cases, pawn shops will be open to trading items with you. That having been said, the items will need to be in at least similar condition and of similar value, if not the item you’re trading in being slightly more value than the item you want to trade for.
You have to understand that pawn shops can sell whatever it is that you want to trade for immediately. They can profit from it today! But if they trade you for something, then whatever you are trading them will be forced into a legal waiting or holding period before they can turn around and resell that item.

This time in waiting will ultimately cost them in productivity and profitability in the end, so when they trade, pawn shops will normally only trade when the item’s value is in their favor to do so. When it comes to striking a deal with a pawn shop, you will be happy to hear that pawn shops negotiate so that both parties are happy.

Do Pawn Shops Negotiate?

Yes, in many cases a pawn shop will negotiate with you on your items that you are bringing in. Additionally, if you are looking to buy something, they will typically be willing to negotiate with you on the price of whatever those items are. A good tip is to not get too pushy with the pawn shop. If you only offer then 50% of what they are asking for an item, you will likely insult them and kill the negotiation.

On the other hand , if you re bring something in and ask them for double what they are offering you, they will probably stiffen up a little bit and be less willing to work with you to get you more. When negotiating with a pawn shop, it’s always best to start with smaller, more realistic goals. 20% in either direction is about the maximum acceptable amount to try to negotiate.

Do Pawn Shops Have Layaway?

Yes, in most cases, pawn shops will offer a free, no cost layaway option so that you can slowly pay down your purchase over time. Typically speaking, pawn shops will expect you to pay at least 10% of the item’s value once every 30 days. This can be a great way to get some extremely nice merchandise in an affordable payment structure that will work for both your budget and the pawn shop.

Are Pawn Shops Safe?

Pawn shops are extremely safe businesses and are operate by ethical, morally sound business owners. With the popularity of shows like Pawn Stars, the general public is beginning to realize that pawn shops are brightly lit, well run, honest operations that can offer them the cash they need when they need it the most, and at very afford rates.

Additionally, when shopping for a new item, people are discovering that pawn shops are not full of stolen items and are in fact and great place to find awesome deals on lightly used merchandise that works perfectly and often comes with some kind of warranty.

How Do Pawn Shops Treat Customers?

Typically speaking, pawn shops treat customers very well. Pawn shops are a small business, just like any other and appreciate the people that come into their stores. After all, without their customers, there would be no reason for them to exist. As someone who is coming in to make a cash loan on their items with a pawn shop, you might feel that they are looking down on you in some way, but trust me, they aren’t. Pawn shops deal with people who have just hit a rough spot in their lives on a regular basis and understand where you are at and that you aren’t a bad person.

Most people who come to pawn shops are honest, hard working people who simply had an emergency expense come up or didn’t see a bill hitting them out of left field. These things don’t make you any less of a person and the pawn shops are there to help you in any way they can. Of course, the limit of what a pawn shop can loan you will be based on the items that you bring into the pawn shop to begin with, but they will often do whatever is possible to get you the most money possible and provide you with the easiest repayment terms allowable so that you can come back and get your merchandise back at a later point in time.

Ultimately, pawnbrokers and the pawn shops they run know that they are there to help people. That’s specifically what their job titles are when new staff are hired – they aren’t clerks – they are people problem solvers, or customer worry assistants if you will. They are there to help support you through whatever you are going through.