Pawn shop, the term that strikes fear in most consumers, is a place where people bring items they no longer need in exchange for cash. Although there is a little bit of a stigma attached to these stores, they do provide an important service to consumers.

Many people use pawn shops as an alternative to financial institutions for loans and credit card debt. In the United States, pawnbrokers are highly regulated and must comply with 14 federal laws. Whether you are looking for a used TV or a vintage watch, a good place to start is the local pawn shop.

What to Expect When Visiting a Pawn Shop

A pawn shop is a second-hand store that buys and offers collateral-based loans on items like jewelry, vehicles, and electronic valuables. The shop also sells merchandise purchased outright from customers and those that are pledged as loan collateral by customers who default on their payments, forfeiting the property to the pawnshop. The shop makes its money by selling the goods for which it paid out in cash and through a revolving door of loan defaults and retail sales.

If you walk into a Pawn shop, you are most likely going to purchase an item at a price considerably below the market value of the item. In addition, a pawnshop will likely report all new purchases to local law enforcement, which may or may not match up with any reported stolen items. To avoid overpaying, it’s a good idea to research the item in advance and visit multiple pawn shops to compare prices.