Collateral for Loans
When you pawn an item, it acts as collateral that ensures you repay your debt. You get a ticket that you exchange to redeem the item after paying off the loan, interest and associated fees. If you do not pay the loan as agreed, the pawnbroker can choose to cover the costs of the debt by selling the item or renegotiating the terms of the pawn. By contrast, selling your item transfers ownership directly to the lender.
Pawning and Selling at Pawnshops
The federal government regulates pawnshops, providing a measure of protection against unscrupulous businesses, so you can be confident that the pawnshop will do everything it can to keep your item secure until you redeem it. However, if you decide you want to sell the item instead, research other outlets that enable you to sell your valuables. Pawnshops do connect buyers and sellers, but consignment shops, specialty stores, and auction houses and websites may net you a better price for your item.