Pawn Shop Loans: What They Are And What to Watch Out For (2022)

Emergency cash may be needed for a variety of circumstances, from car repair to the power bill to groceries when payday is still far away. If you’re running short on funds, you may not have time to wait for a traditional loan. Or, you may be concerned about qualifying due to income verification or credit requirements. These are circumstances where you might consider a pawn shop loan.

While they might seem like a relic of the past, pawn shop loans are still available today and offer a way to get quick emergency cash in exchange for collateral: often valuable items you have around the house.

Learn more about these loans, how they work, and why they may not be the best option for you.

Need Cash Now? Get Up to $500* And Pay Back Over Time.

(Video) Pawn Shop Loan Facts

What is a Pawn Shop Loan?

A pawn shop loan is a short-term, secured loan. You take an item of value to the pawnbroker, the shop evaluates it and gives you a loan for a percentage of the value. These loans are typically for 1-3 months, but you can pay back the loan at any time and get your item back. Each month, you’ll need to renew the loan until the end of your loan term.

You must repay the loan by the end of your loan term with interest, and the interest rate on these loans is relatively high (about a 200% APR). How do pawn shop loans work if you don’t repay the loan? If you don’t repay the loan, you forfeit the item, and the pawn shop can sell it to recover the money they loaned you.

(Video) How a Pawn Loan Works

Why choose pawn shop loans over a personal loan or a payday loan? Pawn shop loans are quick and easy to get, you receive cash in hand and they don’t check your credit. They may not verify your income, either. However, you will need to have valid identification and may need to prove the items you're providing belong to you.

If you don’t repay the loan, your credit scores and history aren’t affected. Pawn shops don’t report the lack of payment to anyone. They just sell the item to recover their losses.

How Do Pawn Shop Loans Work?

How do pawn shop loans work? Here are the steps.

  1. Find a local, reputable pawn shop.
  2. Take an item of value to the pawn shop. They typically accept:
    • Jewelry
    • Musical instruments
    • Video game systems
    • Other electronics
    • Valuable coins
    • Firearms
    • Tools
    • Other collectibles
  3. Present the item to the pawn shop and provide proof of identity. The staff will assess the value of the item, decide whether to offer a loan and the loan amount.
  4. Decide whether to accept the loan.
  5. If you accept, you’ll be given cash and a pawn ticket, which has the details of the loan, including the interest rate and any additional fees.
  6. Return within the required timeframe to pay off the loan or extend it (if applicable in your state).
  7. Pay off the loan, as agreed, to get your item back.

What’s a Pawn Shop Title Loan?

Pawn shop title loans use a vehicle that you own outright as collateral for a loan. It’s similar to other pawn shop loans, but instead of pawning an item you may be able to live without, like jewelry or tools, you’re using your car as security for the loan. Pawn shop title loans are often for a higher amount than other pawn shop loans. You can typically get up to 25% of the vehicle’s value.

These are also short-term loans. You typically have up to 30 days to pay off the loan, but it may be longer depending on the lender. If you don’t pay off the loan as agreed, the pawn shop can repossess your vehicle immediately.

(Video) PAWN SHOP: What Do You Need To Get A Loan?

The advantages of a pawn shop title loan are that you receive quick cash that doesn’t require a credit check. The downsides are that the interest rates are high, and you can lose your vehicle.

Do Online Pawn Shop Loans Exist?

A few online pawn shop loans exist. Some specialize in high-end items like luxury watches, gold, expensive jewelry, and designer handbags.

How Online Pawn Shops Work

Online pawn shops work much the same way as in-person pawn shops, with many being connected to a brick and mortar location. (And many only offer online shopping, rather than online pawn loans.) The main difference is that you're required to ship your items to be appraised, oftentimes sending a photo first to get an idea if the shop in question will take your item.

Many online pawn shops have this process:

  1. Provide information about the item you want to pawn, often with photos and certificates of authenticity.
  2. Get an initial offer and either accept or reject it.
  3. Ship your item to the address provided. (Sometimes with a pre-paid shipping label or envelope.)
  4. Receive a final appraisal and offer.
  5. Receive the agreed-upon funds once you accept.
  6. Repay the loan within the agree-upon timeframe with fees and interest.
  7. Receive your item back in the mail.

The best approach to pawning an item, however, is to work with a reputable, local shop rather than an unknown online entity that may accept your items without sending you anything in return. It's also good to note that while you may be able to negotiate terms with an in-person pawn shop if times get tough, an online entity is much more likely to simply sell your item and sever ties with you.

(Video) Pawnshop Loans Vs Other Loans

Instead of an online pawn shop loan, consider an installment loan from Possible Finance. Our loans offer up to $500, which we directly deposit into your bank account within 1-2 days. We don’t check your credit score or use your credit to decide whether to offer you a loan. We offer a monthly repayment schedule, and you can reschedule payments for up to 29 days out with our phone app. (And we don't ask for your valuables as collateral, so the risk on your end is much lower than wondering if you'll ever see that family heirloom again.)

Are Pawn Shop Loans Safe?

A pawn shop loan is relatively safe, in that these loans are regulated by state law in many states. Many shops have been operating for a long time, so you can find a shop with good reviews and that you feel comfortable with as a borrower.

Are they safe in a financial sense? Pawn shop loan interest rates are lower than most payday lenders but higher than personal loans. Personal loans often require good credit, however, which is why people turn to pawn shop loans in the first place. The pawn shop ticket explains the terms of the loan, but if you can’t repay the loan, you lose the item, whether it’s a game system or a car you depend on to get to work.

If you feel like a pawn shop loan is your best option, only pawn items you can live without. Don’t pawn items that are essential for work or school, like the only computer in the household or the truck you rely on for your daily commute. Consider avoiding pawning important sentimental items, as well. Memories are priceless, and there are alternatives to a pawn shop loan.

Pawn Shop Loan Alternatives

While a pawn shop loan offers quick cash, it’s not the only option. There are a range of financial products that can get you cash quickly:

(Video) A Look into a Unique Pawn Shop with RI Jewelry and Loan | All Things Real Estate E16

  • Payday Loans: While not the most ideal option, payday loans can be a better option for fast cash, especially if the items you have to bargain with are necessary for your life or high sentimental value. Fees and interest rates can be higher than a pawn shop loan, but you also don't have to provide collateral.
  • Personal loans: You can get a personal loan from a bank, credit union or another financial institution. Unsecured personal loans don’t require collateral, but these types of loans do often require a minimum credit score and can have high fees attached. There are also secured personal loans, but those do require a type of collateral, making them only sometimes better than a pawn shop loan.
  • Installment loans: With this loan, you borrow a lump sum loan amount and repay it with a fixed number of payments over time. Car loans and home equity loans are examples of installment loans. Installments can be weekly, biweekly or monthly. These loans can be secured or unsecured.(Loans from Possible fall into this category.)

Why Choose Possible Over a Pawn Shop Loan?

  1. An installment loan from Possible Finance can quickly get you up to $500*.
  2. You repay over time.
  3. You don’t have to risk high-value or sentimental possessions.
  4. You can reschedule payments up to 29 days in our easy to use phone app.
  5. We report your on-time payments to two of the major credit bureaus, so you may see a boost in your credit.

You can quickly apply for a Possible Finance loan without leaving your house. All you need to do is download our app, and you can apply in just a few minutes.

We can get you the funds you need—without risking items that matter.

FAQs

What is a disadvantage to receiving a loan from a pawnshop? ›

The most significant drawback of a pawn shop loan is its cost. Interest rates and finance charges for pawn shop loans are often high. It's common to see interest rates between 5% and 25% a month. Another disadvantage is that if you don't repay your loan on time, the pawn shop can sell your item.

How does a pawn shop loan work? ›

Here's how pawn shop loans work: You bring in an item as collateral, and the pawnbroker will determine the value of the item, give you a loan based on its cost, and then hang on to your collateral until you've paid off the loan. In a nutshell, it is one way to get a personal loan without a credit check.

Do pawn shop loans affect your credit? ›

The short answer is no! A pawn loan will not improve your credit score, however, it also won't negatively affect it. Pawn loans utilize collateral in exchange for a monetary loan. You can take your item/items to your local pawn shop where the pawnbroker will offer you an amount to pawn your item for.

What is a pawn shop loan called? ›

A pawnshop loan is what's known as a collateral loan. To borrow money from a pawnshop, you provide an item as collateral—such as jewelry, a TV or a musical instrument—and the pawnshop provides a loan based on its appraised value.

Is a pawn shop loan a good idea for quick cash? ›

Pawn shop loans give you access to quick cash in exchange for jewelry, electronics or other valuable items in your possession. However, this can be a risky solution for your short-term financial needs, due to high fees and the risk of losing your collateral.

What are the advantages of pawn loans? ›

Relatively lower interest rates.

Even though pawn shop loans have very high interest rates, they are still often much cheaper relative to payday and title loans, which can have APRs that average 300% or higher. If you have bad credit or no credit, this loan is a cheaper alternative to predatory payday lending.

What is a typical pawn shop interest rate? ›

One pawn shop shared that costs are typically around 20% to 25% interest per month plus any fees. That's the same interest rate many credit cards charge per year, so pawn shop loans should really be considered a last resort for most households. Some pawn shop loans charge over 200% APR.

How can I get the most money at a pawn shop? ›

When negotiating with a pawn shop to establish a value for your items, there are some things to keep in mind:
  1. Haggling is expected. ...
  2. Make a good impression. ...
  3. Consider multiple trips. ...
  4. Adjust your expectations. ...
  5. Create a win-win. ...
  6. Let the pawn shop offer first. ...
  7. Don't volunteer information. ...
  8. Be ready to walk away.

Can you extend a pawn loan? ›

What is an Extension? If the individual does not have enough money to repay the loan after 30 days, he/she can extend the pawn loan for another month by paying only the monthly fee. There is no limit on how many times an individual can extend a pawn loan.

How are interest rates and fees calculated for pawn loans? ›

Borrowers are charged interest on a pawn loan typically between 20-25% per month depending on the loan amount. So if, for example, you were offered $100 to pawn an Xbox One, then when your loan is due in one month, you will be expected to pay $120 ($100 loan + 20% interest fee = $120).

What is a personal installment loan? ›

A personal installment loan is a type of loan where you borrow a sum of money and must pay it back in fixed amounts called “installments.” Personal installment loans are closed-end loans, meaning that the lender gives you all of the money at the beginning.

Do pawn shops report to credit bureaus? ›

A pawnshop won't report you to the credit bureaus, so the loans won't affect your credit reports or credit scores. You can just walk away from the loan. Pawnshops offer small loans, which are convenient if you need quick cash — but they won't cover big expenses, like a major medical bill.

How much of a loan can I get at a pawn shop? ›

The staff assesses the item's value, condition and resale potential, then decides whether to offer a loan. Nolo.com, a website that answers legal questions, estimates pawnshops will lend you about 25% to 60% of resale value.

What do the three balls mean on a pawn shop? ›

Pawnbrokers were easily identified by their signs of three golden balls, a symbol of St Nicholas who, according to legend, had saved three young girls from destitution by loaning them each a bag of gold so they could get married.

What does the 3 balls pawn symbol mean? ›

The pawnbrokers' symbol is three spheres suspended from a bar. The three sphere symbol is attributed to the Medici family of Florence, Italy, owing to its symbolic meaning of Lombard. This refers to the Italian province of Lombardy, where pawn shop banking originated under the name of Lombard banking.

How can I get money fast without a loan? ›

19 Ways to Find Fast Cash
  1. Sell spare electronics. ...
  2. Sell your gift cards. ...
  3. Pawn something. ...
  4. Work today for pay today. ...
  5. Seek community loans and assistance. ...
  6. Ask for forbearance on bills. ...
  7. Request a payroll advance. ...
  8. Take a loan from your retirement account.
Aug 16, 2022

Can you pawn the same item twice? ›

Now, you are in need of some quick cash and are wondering if you can pawn that same laptop at the same pawn shop again. Will the shop be interested in something that they already bought from you once? Yes, they will. In fact, there are many benefits to a pawn shop when a person brings in the same item again.

Can you pay a pawn loan with a credit card? ›

Traditionally, most pawn shops were cash-only, however, many now offer debit and credit card payment methods.

How long does a pawn last? ›

Loans are very small: The average pawn loan is $150 and lasts 30 days, according to the National Pawnbrokers Association.

Do you need a receipt to pawn something? ›

In areas where crime is common, an affidavit might not be enough to protect the pawn shop. The pawnbroker may also ask you to provide some sort of proof of ownership, such as the receipt from when you purchased the item or warranty information.

What is a payday alternative loan? ›

A payday alternative loan is a type of short-term loan offered by federal credit unions as an affordable alternative to expensive payday loans if you need money to make ends meet on short notice. The National Credit Union Administration (NCUA) sets guidelines for the costs and terms of PALs.

Do you get more if you sell or pawn? ›

Getting the Most Money when Selling or Pawning Your Items

Often, you can get more money for your item by selling it. However, with a pawn loan, you can get the money you need, and you still get to keep your item. Go online and find out what your item may be worth.

How do you borrow money from the cash App? ›

How To Borrow Money From Cash App Borrow
  1. Open Cash App.
  2. Tap on your Cash App balance located at the lower left corner.
  3. Go to the “Banking” header.
  4. Check for the word “Borrow.”
  5. If you see “Borrow,” you can take out a Cash App loan.
  6. Tap on “Borrow.”
  7. Tap “Unlock.”
  8. Cash App will tell you how much you'll be able to borrow.
Aug 22, 2022

What does the term APR mean? ›

The Annual Percentage Rate (APR) is the cost you pay each year to borrow money, including fees, expressed as a percentage. The APR is a broader measure of the cost to you of borrowing money since it reflects not only the interest rate but also the fees that you have to pay to get the loan.

Why do pawn shops lowball? ›

They will low ball a deal so that their profit margin goes up when they turn around to sell the items.

Can you negotiate prices at a pawn shop? ›

Negotiate. Every item will have a price, but the sticker price should just be considered your starting point. Pawnbrokers have a lot of experience negotiating, so make sure you have a limit in mind before you begin bargaining.

How much should I ask for at a pawn shop? ›

A good starting point is around 80% of the asking price. On some items, especially things that they have a lot of stock of, you can also ask what the lowest price is they will accept and offer $5 – $10 less.

What is a grace period at a pawn shop? ›

Once a customer misses a payment, the pawn shop holds the item for a specified time, known as a grace period, before taking formal ownership of the item. Grace periods offer customers a chance to get their pawned item back when they fail to make a monthly payment.

What happens if you default on a pawn loan? ›

You can lose your property.

If you default on your loan to a pawn shop, the property you left at the shop to obtain the loan becomes the property of the pawnbroker. You're usually given some time, typically 30 to 60 days, to pay your debt and get your property back; if you don't, the pawnbroker can sell it.

Can you sell something you already pawned? ›

If you pay off your loan in time, you get your item back. If you don't pay the loan in time, the pawnshop is free to sell your item. You can also sell your items outright.

Is it worth it to pawn jewelry? ›

Most of the time, any loan that you'll receive from a pawn shop will be for significantly less than the item you're pawning is worth. For example, if you pawn a watch with a used value of $1,000, the pawnbroker might offer you a loan of $250 to 600.

How can I get s bank loan? ›

But in general, you can expect to need:
  1. Pay stubs/proof of income.
  2. The last couple years of tax returns.
  3. Documentation of 401(k)s and other financial accounts.
  4. Photo ID.
  5. Rent/mortgage history.
  6. Proof of collateral, if you're pursuing a secured loan.
Mar 24, 2022

What is a flex loan? ›

A flex loan is a type of credit that can seem pretty convenient. Like a personal line of credit, a flex loan lets you borrow money, repay some or all of your balance, and then borrow again up to your credit limit.

What are the 3 types of loans? ›

The lender decides a fixed rate of interest that you must pay on the money you borrow, along with the principal amount borrowed.
...
Types of secured loans
  • Home loan. ...
  • Loan against property (LAP) ...
  • Loans against insurance policies. ...
  • Gold loans. ...
  • Loans against mutual funds and shares. ...
  • Loans against fixed deposits.

What is the credit score needed for a personal loan? ›

Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 690.

Can a pawn shop tell you who pawned an item? ›

Law enforcement authorities have the ability to download information about the items pawned or sold to the pawn shop as well as the description and identification of the person that sold or pawned items to the pawn shop.

How do pawn shops test gold? ›

First the item is rubbed on a black testing stone. The gold mark that remains is what is then tested with the acid. Acid testing can be used to test 10k, 14k, 18k and 22k gold. Acid testing should always use an inconspicuous area of the jewelry item.

What happens when you pawn something? ›

When you pawn an item, you are taking out a loan using your valuable as collateral. The pawnbroker will agree to give you a certain amount of cash and hold your item until you have paid back the loan amount plus interest and fees.

What is the trade off to no credit history check? ›

Credit Basics form note taking guide
TermDefinition
What is the trade off to no credit history check?higher interest rates and fees
credit sourcesprivate mortgage companies, government (student loans), depository institutions (Bank of America), etc.
Credit limitamount of money the borrower can spend on a credit card
33 more rows

Can you pawn a contract phone? ›

You can pawn, sell or buy many different types of items at a pawn shop. Some things your local pawn shop may consider include items like sporting goods, jewelry, firearms, precious metals and electronics — like cellphones.

Which of the following is an example of unsecured debt? ›

Examples of unsecured debts are credit card debt, personal loans, medical debt, etc.

What does out the door mean pawn shop? ›

The out-the-door price is the total amount you'll pay for your car, truck or SUV.

Why are pawnbrokers called Uncle? ›

noun A pawnbroker: so called in humorous allusion to the financial favors often expected and sometimes received from rich uncles.

How does a pawn shop work? ›

Here's how pawn shop loans work: You bring in an item as collateral, and the pawnbroker will determine the value of the item, give you a loan based on its cost, and then hang on to your collateral until you've paid off the loan. In a nutshell, it is one way to get a personal loan without a credit check.

What is the symbol for pawn shop? ›

The pawnbrokers' symbol is three spheres suspended from a bar. The three sphere symbol may be indirectly attributed to the Medici family of Florence, Italy, owing to its symbolic meaning in heraldry. This refers to the Italian region of Lombardy, where pawn shop banking originated under the name of Lombard banking.

What is a pawn shop called? ›

A pawn shop (also called a pawnshop or pawnbroker) is a shop or business who loans money to people who bring in valuable items which they leave with the pawnbroker.

Why do pawn shops exist? ›

Pawnshops were created for the purpose of getting loans in exchange for something called collateral. Collateral can be anything of value traded for cash. Most people would go into a pawn shop with an antique or precious ring and receive some money according to the value of the item.

What are the advantages and disadvantages of having a credit card? ›

The pros of credit cards range from convenience and credit building to 0% financing, rewards and cheap currency conversion. The cons of credit cards include the potential to overspend easily, which leads to expensive debt if you don't pay in full, as well as credit score damage if you miss payments.

What are the common challenges of pawnshops in the Philippines? ›

Suratos (2000) identified the five more serious problems in pawnshop operation, and they are: (1) acceptance of fake or placed jewelry; (2) unwillingness of pawners to accept lower appraisal; (3) unreasonable complaints of pawners after redeeming pawned articles; (4) 90-day notice prior to auction sale did not reach ...

What happens when you pawn something? ›

You bring in an item to a pawnshop, and the pawnbroker will offer you a short-term loan based on the item's value. If you pay off your loan in time, you get your item back. If you don't pay the loan in time, the pawnshop is free to sell your item. You can also sell your items outright.

How long does a payday loan stay in the system? ›

Just like any other type of defaulted payment, payday loans will remain on your credit record for 6 years. Needless to say, if your credit score is less than good, to begin with, defaulting on a payday loan might be very harmful to your credit history altogether.

What are 3 alternatives to getting a payday loan? ›

Here are 10 better alternatives.
  • Consider a Payday Alternative Loan (PAL) ...
  • Apply for a "Bad Credit" Personal Loan. ...
  • Borrow From Family or Friends. ...
  • Ask Your Creditor About a Payment Plan. ...
  • Seek Help From a Credit Counselor. ...
  • Get a Side Hustle. ...
  • Consider a Low-Interest Credit Card. ...
  • Explore Lending Circles.
Sep 6, 2021

What are three disadvantages of payday loans? ›

Disadvantages of Payday Loans
  • They are expensive. For one thing, payday loans are sometimes very expensive. ...
  • Payday loans are considered predatory. ...
  • It is easy to get trapped in a cycle of debt. ...
  • They have access to your bank account. ...
  • Some payday lenders use questionable collection practices.

Where should you not use a credit card? ›

The 5 types of expenses experts say you should never charge on a credit card
  • Your monthly rent or mortgage payment. ...
  • A large purchase that will wipe out available credit. ...
  • Taxes. ...
  • Medical bills. ...
  • A series of small impulse splurges. ...
  • Bottom line.

What should you not buy with a credit card? ›

Purchases you should avoid putting on your credit card
  • Mortgage or rent. ...
  • Household Bills/household Items. ...
  • Small indulgences or vacation. ...
  • Down payment, cash advances or balance transfers. ...
  • Medical bills. ...
  • Wedding. ...
  • Taxes. ...
  • Student Loans or tuition.

What is the 5 C's of credit? ›

What are the 5 Cs of credit? Lenders score your loan application by these 5 Cs—Capacity, Capital, Collateral, Conditions and Character. Learn what they are so you can improve your eligibility when you present yourself to lenders.

What law governs the business of pawnshop? ›

Pawnshop Regulation Act P.D. No. 114, a.k.a. the "Pawnshop Regulation Act", governs pawnshop establishments and provides definite and uniform standards for their operation.

How are interest rates and fees calculated for pawn loans? ›

Borrowers are charged interest on a pawn loan typically between 20-25% per month depending on the loan amount. So if, for example, you were offered $100 to pawn an Xbox One, then when your loan is due in one month, you will be expected to pay $120 ($100 loan + 20% interest fee = $120).

Can I pay my pawn with a credit card? ›

Traditionally, most pawn shops were cash-only, however, many now offer debit and credit card payment methods.

Can a pawn shop tell you who pawned an item? ›

Law enforcement authorities have the ability to download information about the items pawned or sold to the pawn shop as well as the description and identification of the person that sold or pawned items to the pawn shop.

Do pawn shops give you more if you pawn or sell? ›

A pawn store will generally offer more money if you're selling your item instead of pawning it. However, it does depend on a few factors. For instance, if you're selling an in-demand item, such as gold jewelry or a high-end watch, the pawnbroker is more likely to offer you a higher cash value.

How many times can you pawn the same item? ›

Yes, they will. In fact, there are many benefits to a pawn shop when a person brings in the same item again.

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