Everything you think you know about pawn shops is wrong. Most aren’t sketchy enterprises staffed by con artists dealing in stolen goods. Nor are they typically in the business of shelling out big dollars for rare collectibles like the crew at Las Vegas’ World Famous Gold & Silver Pawn Shop, the store featured on Pawn Stars.
Instead, pawn shops are in the distinctly unglamorous but useful business of loaning small amounts of money — $150, on average — to people who need cash fast. The industry serves millions people annually, but if you’ve never set foot inside a pawn shop, the whole process probably seems a bit mysterious. To clear up the confusion, we talked to a pawn industry expert who helped clue us in to some of the big truths about pawn shops, how they work, and whom they serve.
1. Pawn shops are big business
“There are somewhere around 12,000 or 13,000 pawn shops in the U.S. Around 30 million Americans rely on them to either make ends meet or to buy and sell used merchandise out of convenience,” Jordan Birnholtz, the founder of PawnGuru, a website that helps people find pawn shops interested in their items, told The Cheat Sheet.
Pawn shops provide short-term, collateral-based loans to consumers. Getting a loan is fairly straightforward. You bring an item to a pawn shop. The pawnbroker looks it over. If he thinks it’s something he could eventually sell, he will offer to loan you a fraction of its value. If you accept the offer, you get cash on the spot. You also have a set time — usually around one to four months — to pay back the money you borrowed from the pawnbroker, plus any interest and fees. If you can’t repay the loan, you lose your collateral (the pawned item), which the pawnbroker can then sell to make his profit.