What type of business offers secured loans to people, with personal property used as collateral?

What type of business offers secured loans to people, with personal property used as collateral?

• A. Pawn shop
• B. Loan agency
• C. Collateral lender
• D. Finance company

Answer: (A)

A pawn shop is a business that provides secured loans where personal property serves as collateral. When individuals bring in items of value, such as jewelry, electronics, or other tangible assets, they can receive a loan based on a percentage of the item's appraised value. If the loan is repaid within a specified timeframe, the borrower can reclaim their item. However, if the loan is not repaid, the pawn shop has the right to sell the item to recover the loan amount. While loan agencies and finance companies may also offer secured loans, they typically do so through more formalized credit processes and may not function in the same transactional manner that pawn shops do. Collateral lenders can be seen as a broad category, but a pawn shop specifically denotes a retail environment that deals directly with physical items and immediate cash exchanges. This distinguishes it from other financial institutions that might not have the same physical pawn transaction model.

A pawn shop is a business that provides secured loans where personal property serves as collateral. When individuals bring in items of value, such as jewelry, electronics, or other tangible assets, they can receive a loan based on a percentage of the item's appraised value. If the loan is repaid within a specified timeframe, the borrower can reclaim their item. However, if the loan is not repaid, the pawn shop has the right to sell the item to recover the loan amount.

While loan agencies and finance companies may also offer secured loans, they typically do so through more formalized credit processes and may not function in the same transactional manner that pawn shops do. Collateral lenders can be seen as a broad category, but a pawn shop specifically denotes a retail environment that deals directly with physical items and immediate cash exchanges. This distinguishes it from other financial institutions that might not have the same physical pawn transaction model.