Pawn shop sounds like a shady place, but these second-hand stores actually serve an important purpose in many communities. People bring in valuable items to use as collateral for loans, and the store then sells these goods to make money. This makes them much like a dozen garage sales and a flea market all rolled into one.

The most common revenue source for a pawn shop is the income it earns from making loans and collecting interest on those loan balances. This revenue source is often based on the amount of the item’s resale value, but it can also be substantially affected by the length of time the shop has had the item in inventory.

Some pawn shops also generate income by selling brand-new retail items that are in high demand. These goods can range from musical instruments to firearms. The pawnbroker typically sets a sale price on these goods that is often a significant percentage above what the item would sell for at a regular resale store.

Pawn Shop Guide: How to Buy, Sell, and Trade Smartly

While some pawnshops sell items that are stolen, they often cooperate with police agencies on a daily basis to prevent the movement of stolen merchandise. Most pawnshops are required by law to ensure that a customer is who they say they are through the verification of photo identification, and to hold an item for a certain number of days after it has been purchased (for example, 90 days for a television) to give local police a chance to track down a stolen item.…