What happens if a person does not repay the loan at a pawn store?

Pawn stores work on small collateral loans. Hence, when a person is not able to pay the loan back, the item they use as collateral to secure the loan gets owned by the pawnbroker. In other words, the pawnbroker gains possession of the item when the loan is not paid back in the amount of time specific in the loan terms. Because the loan is based on collateral—that is, an actual piece of property—the loan is considered paid in full when the item is handed over to the pawnbroker. This has a positive side to it to some end. The credit line of the customer does not get hurt in case the loan is not paid back. He/she only loses the possession of the item. On top of that, some pawn stores also offer the option to renew the loan expiration in case of difficult situations.