You’ve seen the television shows. A guy walks into a pawn shop with a ring he inherited from his grandmother. A pawnbroker takes the ring in exchange for a handful of cash. End scene.
So, did the guy sell or pawn his ring, and what’s the difference? If you’re unfamiliar with the pawn shop industry, you may be confused by the services a pawnbroker offers. This blog will explain what it means to pawn an item for a loan and sell an item for cash.
What Is Pawning?
When you pawn an item, you’re essentially taking out a collateral loan. You use an item of value as collateral to borrow money. When you repay the money-plus interest and fees-you get the item back.
At a pawn shop, you initiate a collateral loan by meeting with a pawnbroker to appraise your item. The pawnbroker will offer you a loan amount based on a percentage of your item’s estimated value.
If you accept the loan, you “lend” your item at the shop in exchange for cash and a pawn ticket. You’ll use the pawn ticket to reclaim your item, following repayment. In the event you can’t repay the loan, you permanently surrender your item. The pawnbroker sells the item to recoup the cost of the loan.
What Is Selling?
Selling an item is exactly what it sounds like: exchanging an item in return for money. The process is similar to pawning an item. You’ll bring your belongings to the pawn shop for appraisal. A pawnbroker will offer you an amount of money based on the estimated value of your items. If you accept the offer, you exchange your items for the agreed-upon price, and the transaction is complete.
The difference between pawning and selling is that when you sell an item, you no longer have claim to it. Items become property of the pawn shop once you accept the money. The only way you can retrieve your items is by repurchasing them from the pawn shop-likely at a higher price.
On the other hand, you don’t have to repay the money. You are not accountable to the pawnbroker once you surrender your items.
Which Option Is Better?
Having trouble trying to decide which option is for you? Before you pawn or sell any of your belongings, ask yourself these two questions:
- Will I want this item back?
- How much money do I need?
Selling is a good option for unwanted items you can easily live without. Selling provides the opportunity to make some fast cash without obligation. In this one-time venture, you have no further responsibility to the pawnbroker.
But, what if your item has sentimental value? Is it a family heirloom? Is there any chance you’ll want or need it back in the future? If so, pawn it. You’ll get the cash you need while maintaining ownership of your item.
Additionally, if you’re seeking maximum cash, you usually receive a larger amount when you pawn an item. Pawning presents less of a risk to brokers. Unless you don’t repay your loan, a broker doesn’t have to worry about resale value.
You can even re-use high-value items-like jewelry or precious metals-as collateral for subsequent loans.
Since these items tend to appreciate over time, you may even get a higher amount in the future.
However, there may be some high-value items you can’t re-pawn. Because technology is rapidly updating, electronics tend to depreciate in value. Therefore, gaming consoles and televisions may be better suited for sale.
Since pawn shops accept different items and offer different incentives, it’s okay to shop around. While one broker may offer you $50 for that rare coin, a broker up the street may offer $75. Whether you’re pawning or selling an item, check with each pawn shop to confirm eligible items, loan rates, and applicable fees.