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Pawnshop companies make money by giving short term loans to customers who offer jewelry, electronics, tools, musical instruments and other merchandise as collateral or by purchasing merchandise outright from customers at a steep discount. Loan terms are typically one to three months in length, with customers expected to cough up monthly storage and loan servicing fees of 10% to 20% a month. If a customer fails to make a monthly payment, the pawnshop, following a grace period, can sell the item.

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