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Pawning it Off – How Does it Work?

We have all seen depictions of pawnshops and pawnbrokers whether it’s on T.V or in the movies, but if you have never actually stepped foot into one or dealt with a broker, you may be wondering how exactly it works. Here we are going to take a deeper look into everything you need to know when it comes to pawning it off. A pawn is a loan based on collateral. A pawnbroker will take a valuable item such as gold, jewelry, diamond, electronics, firearms, or other items and provide a cash loan in exchange.

The amount of the loan will vary greatly based on the worth of the collateral item. The customer and broker will come to an agreement on the amount of time given to repay the loan upon which the item will then be returned. If the client wants to forego having to repay the loan, they can choose to simply sell or surrender the item and keep the cash.

Advantages of Pawning

Many people who use pawning services have found themselves in a situation where they are in need of a loan quickly but do not or can not take on any more debt or they cannot wait weeks for their money to come in.

Pawn Shops do not perform credit checks because they have already been given the collateral, so if a client fails to pay, they already possess an item worth the loan amount. Of course it is a good idea to understand the specific rules and regulations of the pawnshop you want to do business with to avoid any miscommunication.

Pawnbrokers are very different from appraisers. Brokers accumulate a wide range of products and must be considerate of many different variables often utilizing blue book value acquired from the internet to estimate current market value. Appraisers evaluate the condition of the item as well as the circumstances of the seller. If you are in need of cash quickly, knowing the value of what you have and which items to sell can be critical.

Sell or Pawn? Which is Better?

When you are choosing between pawning an item or selling, the number 1 question you need to ask yourself is is it something I want to get rid of? Does the item have sentimental value or is it a family heirloom? If so, you may not want to permanently let go of it.

You should also consider if the item will appreciate in value over time. For instance, if you take out a loan on gold, you retain ownership meaning you can reuse it at a later date for collateral and repeatedly in the future if needed. Pawning instead of selling may also allow you to get more cash for your item since the broker is not as concerned about finding a way to resell your item.


Pawnbrokers must abide by all major federal rules that apply to any other financial institution including the Patriot Act, Bank Secrecy Act, Truth-in-Lending Act, Trading with the Enemy Act, The Gramm-Leach-Bliley Financial Services Modernization Act and other Executive Orders and privacy regulations that are applicable. Pawn transactions should not be completed for smaller amounts than what is required by state pawn laws, however, the maximum amount will vary state to state.

If you are considering pawning items, you should inform yourself with how the process works and what rules and regulations are set in place to protect you, your collateral items, as well as the broker.