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The amount a pawn shop is willing to lend is based primarily on the value of the item, but it can also be substantially affected by the pawnshop's current inventory at the time of the loan.Student Loan Exchange Reviews 4. A pawnshop makes a loan to an individual who turns over custody of an item, such as a television or a computer, that serves as collateral for the loan. The first revenue source for a pawnshop is income derived from making loans and earning interest on the loan balances.

Pawnshops can also make money from retail sales, either selling merchandise purchased directly from customers or items pledged as loan collateral from customers who subsequently defaulted on their loans.

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If the customer fails to repay the loan plus the interest (or at the very least, the interest charge), the customer forfeits the property put up as collateral to the pawnshop.

Because the risk of loan default is high, the pawnshop owner will charge the customer a higher interest rate for the loan than a traditional bank loan.

A pawnshop owner makes a loan to a customer who turns over the custody of an item that acts as collateral for the loan.

The two primary ways pawnshops make money is by making personal loans and by reselling retail items.