Pawnshops and pawnbroking have been around for thousands of years. The basic idea behind any pawnshop is to loan people money. It goes like this:
- You bring in something you own and give it to the pawnbroker as collateral for a loan (this act is called pawning).
- The pawnbroker loans you money against that collateral.
- When you repay the loan plus the interest, you get your collateral back.
- If you don't repay the loan, the pawnbroker keeps the collateral.
As defined by the North Carolina General Statutes, 91A-3:*
- Pawnbroker - Any person engaged in the business of lending money on the security of pledged goods and who may also purchase merchandise for resale from dealers and traders
- Pawnshop - The location at which, or premises in which, a pawnbroker regularly conducts business
- Pawn or Pawn transaction - A written bailment of personal property as security for a debt, redeemable on certain terms within 180 days, unless renewed, and with an implied power of sale on default
In the next section we'll discuss an example of a pawn shop transaction.