When a person brings an item to the pawnshop to obtain cash the transaction is considered

When a person brings an item to the pawnshop to obtain cash the transaction is considered

a: a. collateralized loan

b. custodial loan

c. unsecured loan

d. sales agreement

Answer: a: a. collateralized loan

If a given individual takes an object to a pawn shop in order to get money, then this is a type of secured loan. In this capacity, the pawnshop offers the loan, which is a cash amount to the person, but the item (be it jewellery, electronica, or other product) is the security. The pawnshop then keeps the item as security for the agreed amount of cash till the loan is paid with an added interest. In the event that the loan is not paid by the required period, the pawnshop can subsequently sell the pledged item for recovery of the given amount. This kind of transaction is not an open- credit without collateral, a pledge credit as well as a custody credit where an item is deposited for safekeeping, and a sales credit where ownership on an item or product passes on to the buyer.