Buying, Selling, Trading & Loaning since 1978


The National Pawnbrokers Association Answers Frequently Asked Questions about Pawn Stores

​Since the recent economic downturn, families and business owners are looking to pawn stores for the

first time to secure safety net loans that cover unexpected financial needs.  Everyday, thousands of 

Americans are in need of short-term, small -dollar loans that aren't available from banks or traditional

lenders.  With the success of Pawn Stars on the History Channel, many Americans are discovering that 

modern day pawn stores are clean, well-lit businesses that serve consumers from all walks of life.  Yet, 

many are still unclear on what pawn stores do and how pawn loans actually work.

"With the economy still lagging, consumers are looking to pawn stores to borrow  only what they need,"

explains Kevin Prochaska, president of the National Pawnbrokers Association.  "Yet there are some key

things to keep in mind when taking out a pawn loan."

For consumers seeking safety net loans from a trusted, licensed pawnbroker, NPA answers the 

following  questions about pawn stores:

1. What does a pawn store do?  The core of pawn store's business is making collateral loans.  Pawn

stores offer loans, secured by something of value.  The pawn store may have other business elements

such as retail sales.  However, pawnbrokers focus on lending money.

2. How does a pawn loan work?  Customers bring in an item of value, and the pawnbroker offers a loan

based on a percentage of the item's value.  The pawnbroker then keeps the item until the 

customer repays the loan with interest and any additional fees that may apply. Pawn stores are regulated 

on a federal, state and local level.

3. How much money can I get for my item?  On average, customers receive only a portion of the item's

retail value.  Remember, the pawnbroker is loaning money on the item, not buying it.  The pawnbroker

must consider the cost of storage, security and future demand for the item, along with the resale value if

the loan is not repaid. The average loan amount nationally is $150.  However, loans can be made for any 

amount, depending on the value of the pawned item.

4. What kind of interest rate will I have to pay on the loan?  Interest rates vary from state to state and

usually amount to less than overdraft fees, utility reconnect fee, or credit card late fees. As an

example, in New Mexico an $80 pawn loan at 10% for 30 days would cost about $8.00.   Compare that to 

an overdraft fee or a credit card late fee that may negatively affect your credit.

5. What do I need to do to get a pawn loan?  In order to secure a pawn loan, you simply need an item of

value and proper identification.  Pawn loans do not require a credit check, bank account or co-signer.

6. What happens if I don't repay my loan?  Defaulting on a loan can never affect consumers' credit

scores.  Because the loan is based on collateral--that is, an actual piece of property--the loan is 

considered paid in full when the item is handed over to the pawnbroker.

"For years, pawn stores have been providing safety net loans to families that encounter sudden financial

emergencies, *adds Prochaska.  "These vital, small-dollar loans simply aren't offered by banks and other

traditional lending institutions."

Consumers can find more information about the pawn industry at www.