Pawn Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Pawn, written in plain English, along with examples of how it is used.
What is Pawn?
It refers to the an item of personal belonging and of value higher than the loan, pledged as security or collateral for a loan or debts. Such personal belonging or property is deposited with pawnbrokers who has the right to encash such pawns incase there is a default in repayment of the loan. The interest rates are very high and the loan amounts are small. Pawnbrokers are licensed by the government.
History and Meaning of Pawn
The term "Pawn" has been widely used across the globe for centuries as a means of obtaining small loans in exchange for personal property. The practice itself dates back to ancient China, where pawn shops existed to provide credit to peasants who were seeking funding for agricultural activities. Over time, the practice spread around the world, with pawn shops becoming a common feature in most cities.
The term itself originated from the Old French word "pan" which means pledge. It then evolved into the English word "pawn," which has been used to describe the act of depositing personal property as collateral for a loan. The pawnshop industry today continues to play an important role in providing credit to underserved communities around the world.
Examples of Pawn
- Joey needed some quick cash, so he took his watch to the pawn shop and pawned it for $100.
- The pawning of personal property is a common occurrence in poorer neighborhoods where access to traditional lines of credit is limited.
- pawn shops are often a last resort for people who are in desperate need of cash and have no other means of obtaining it.
- The pawnbroker retained the ring until the loan, plus interest, was repaid.
- After having lost his construction job due to the pandemic, John had to pawn his tools so that he could pay bills.
Legal Terms Similar to Pawn
- Mortgage - Just as in with a pawn, when a mortgage is taken out, property is given as collateral to ensure that the loan will be repaid.
- Lien - A legal right granted to a creditor to retain possession of property until the debtor has satisfied their loan obligations.
- Security Interest - A creditor's interest in collateral granting the creditor a priority security interest.