Pawn Law and Legal Definition

Pawn means to pledge an item of personal property as security for a loan, and leave the pledged item with a pawnbroker. The interest rates are inflated, the amount of the loan is well below the value of the pledged property, and the broker has the right to sell the item without further notice if the loan is not paid. Pawnbrokers are licensed by the state and subject to reporting requirements that vary by jurisdiction.

If the loan is not repaid when due, the personal property pledged is forfeited to the lender. The property is known as collateral. A pledge occurs when someone gives property to a pawnbroker in exchange for money.

As the pledge is for the benefit of both parties, the pledgee is bound to exercise only ordinary care over the pledge. The pledgee has the right of selling the pledge if the pledgor make default in payment at the stipulated time. In the case of a wrongful sale by a pledgee, the pledgor cannot recover the value of the pledge without a tender of the amount due.