Sell Versus Pawn

• When an owner sells an item, the owner and the buyer agree on a price, the buyer pays the owner and the item then belongs to the buyer. When an owner pawns an item, she gets a loan using the item as collateral. If the owner does not pay the loan and accompanying fees before a set date, the pawn shop that loaned money on the item becomes the legal owner of the item.
  
  

Pawn Rules

• Various government agencies regulate the pawn industry. Though specific rules will vary between states, and often local jurisdictions, the basic rules for pawn shops are similar. Generally, a consumer has between 30 and 60 days to recover a pawned item. Some states allow consumers to renew pawn loans. To renew a loan, a consumer generally must pay the fees on the loan, and then will receive a 30 day extension depending on the state's law. A pawn loan will result in a high interest rate and fees, often totaling between 5 and 25 percent per month.
  
  

Offer Differences

• Pawn shops will often pay more when buying an item from a consumer then when loaning against it. However, as pawn shops make most of their money through the interest and fees, the difference generally is not significant. Pawn shops will typically loan a consumer about half of the price that the shop expects to get for selling the item. For example, if the pawn shop expects to sell a used laptop computer for $150, they will likely loan about $75 on the item.
  
  

Choosing Sale or Pawn

• When a consumer knows that he will leave an item at a pawn shop for a few months before being able to pick it up, it may make more sense to sell the item and avoid paying additional fees on the transaction. For items with a sentimental meaning to the consumer, pawning provides a way to use the item to get money while leaving the consumer the ability to get the item back. As the offer from the pawn shop will vary based on the item and the particular pawn shop, a consumer can ask how much the shop will pay to buy an item and how much it will loan on the item and use this information to determine which makes the best sense financially.