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What is a Pawn Shop? | October 2019

How Pawning Works

A pawn shop is simply a used goods store that also issues loans.

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These shops have been around for thousands of years. Scholars believe they started independently in many different regions. The first were likely formed in ancient China to serve farmers. Farmers would visit these pawn shops to buy and sell used farm equipment, and to get short term loans using their tools as collateral. Pawn shops exist today in many cities across the United States of America, and in countries around the world. Although few shops today deal principally in farm equipment, many still deal in other industrial appliances and tools. However, most of their purchases are electronics, jewelry, guns (in certain regions), and antiques.

A Brief History of Pawn Shops

They’re in the Bible

There are pawn shops in the Bible. Deuteronomy, the fifth book of the Old Testament, exhorts Israelites not to issue gratuitously high-interest loans. To be clear, it did not prohibit the issuance of all loans, but imposed restrictions and guidelines on the practice. Many scholars also believe that this part of the Old Testament was written in the 7th Century BC, placing this practice at least 2,700 years ago.

They’re everywhere

Pawn shops also popped up in China nearly 3,000 years ago in connection with Buddhist monasteries to serve farmers. They also appeared in ancient Greece and Rome, probably by way of the Middle East. In Europe, the practice came to be regulated by the Catholic Church in the Middle Ages. The church believed it was wrong for Christians to charge interest on debts. This created a peculiar situation in which only Jews were allowed to lend money, so all pawn shops were run by Jews in the Middle Ages. Later on, monks reversed course and insisted on the validity of charging interest for a creditor who otherwise wouldn’t profit, thus allowing Christians to enter the money lending business. You might’ve heard of some of these Christian pawnbrokers before, like the Medici family.

The Royal Family Pawn Shop

After the church loosened its regulations on pawn shops, the Medicis, one of Italy’s most prominent families, started to loan money. The symbol for pawn shops, three golden orbs, is actually the Medici family crest. A similar family, the Lombards, from England, are said to have even lent money to King Edward the Third when he needed money for a war against France. From the Middle Ages  all the way through the Industrial Revolution, pawn shops were principally used by royalty and aristocrats to finance their lifestyles and wars. Indeed, few other members of feudal society had possessions that could be used to collateralize a loan. When you’re a serf, you don’t have an iPhone or diamonds to sell or collateralize a loan with.

Pawn Shops in the United States

The pawn industry started in the United States in the 1600s, but the Industrial Revolution really expanded the industry. Prior to the Industrial Revolution, most of the wealth in Europe was the land. Factories made large scale trinkets and small items that were cheap enough that peasants could buy them. Early poor immigrants in the 1800s brought only their most precious jewelry. They couldn’t carry much on the boat over from Europe. So they used their jewelry for short term loans to start out in America.

Similarly in the late 18th and 19th century, there was a big wealth gap for everyone. Peasants, like farmers and other tradesmen, didn’t have much of value to trade for.

But they did have their one nice dress or an extra pair of shoes. History says that they’d go pawn these items on Monday and come back with them on Friday. Some people think that there’s where we get the idea that Friday = payday, as they’d get their clothes back at the end of the week.

200+ Years Later

Did you know that pawn shops were essential in getting people through the Great Depression? They were some of the only places you could get cash, because banks were all closing from over-lending and a lack of effective monetary policy in response.The Great Depression sounds like ages ago, but in the context of the 3,000-year-old history of pawn shops, it’s more like yesterday.

How do Pawn Shops Work?

Pawn shops can do three things for you. They can buy an item, sell an item, or issue a short term loan using your item as collateral – pawning. If you choose to sell your item instead of pawning it, you will get more money up front. If you pawn your item, the pawn shop keeps the item until you pay back the loan with interest. If you pay back the loan with interest, you will get the item back, if you do not pay back the loan, the pawn shop keeps the item and sells it to another customer.

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What Pawn Shop Regulations Exist?

Every pawn shop has to follow a set of pawn shop regulations and guidelines to make sure they provide reliable, safe, and trustworthy services to their community.To make sure you stay informed, we’re going to give you a rundown on exactly how these regulations work.

The Loans Are Secured by You

Pawn shops use your items to create a loan. The item that you bring in has a certain amount of value, and they pay you part of that value to collateralize the loan, or buy it outright. In others, no transaction can happen without you willingly giving them your item. They can’t force you to give up your item, and if you don’t like the deal, you can walk out on them at any time and find another shop that will work with you.

Everything Is Done Through Written Contract

Pawn shops are required to give out a written contract on any and all deals that they make with their customers. When you go to a pawn shop to make a sale, a contract is issued by the pawn shop owners with you to make sure you recognize your rights as a seller and to give both parties physical proof that the transaction happened successfully.

They Are Legally Certified

Unlike modern peer to peer markets, every pawn shop created must be legally certified by authorities in order to operate legally. Each pawn shop goes through a certification process before they can even start making trades and deals. In order for them to stay in business, they have to continue to get routine certifications as well. With all of this in mind, there’s no doubt that you can trust a pawn shop for your selling needs.

Why Use a Pawn Shop Instead of Craigslist or eBay?

Well, pawn shops certainly have lots of history, but why are they still useful today? You could always sell your item on Craigslist, but Craigslist has a reputation for being flakey or dubious. Same goes for Facebook Marketplace. And eBay takes weeks to get you your cash, which isn’t terribly pleasant to experience.

Pawn shops give you money immediately for selling your item. Also, pawn shops allow you to pawn items. Payday lenders can also give you short term loans, but if you don’t pay back your loan they can garner your wages and destroy your credit rating. If you don’t pay back a loan to a pawn shop, the worst that they’ll do is take your item.

So really, pawn shops are the most convenient way to get cash today. And PawnGuru is the most convenient way to get to pawn shops. You can post your item on PawnGuru, we’ll show your item to pawn shops, they’ll bid on it for you. Then you can go and pawn or sell your item for cash today. It’s the fastest and safest way to sell your item. All local. We’ll connect you to the best pawn shop deal around.

Looking to sell or pawn an item now?
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Pawn or Sell An Item


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What is a Pawn Shop? | October 2019
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What is a pawn shop? Here is a brief history of pawn shops from ancient history through today. Also included is a short explainer of how they work.
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PawnGuru
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