Are Pawnshop Loans a Good Idea?
Quick answer: Pawnshop loans at a glance
- Loan amount: Based on the pawnbroker’s assessment of your item’s resale value, condition and demand.
- Costs: Interest rates and fees vary by state and shop. Ask for the annual percentage rate (APR) and total repayment amount before accepting a loan.
- Repayment term: Pawnshop loans are short-term. Check your pawn ticket for the due date and any applicable grace period.
- Credit check: Pawnshops generally don’t require a credit check, and pawn loans typically aren’t reported to the major credit bureaus.
- Main risk: If you don’t repay or redeem the item within the required time, you could lose the property you pledged as collateral.
A pawnshop loan is a short-term, secured loan that lets you borrow against an item you own — no credit check required. That makes it a common emergency financing option, but the costs can be steep. They can make sense in a pinch, but only if you’re confident you can repay quickly and are prepared to lose the item if you can’t.
How do pawnshop loans work?
A pawnshop loan uses an asset that you own as collateral, in exchange for a cash payment. Nearly any item of value can be used — firearms, jewelry, electronics and more. The pawnbroker will appraise the item and offer you a percentage of its anticipated resale value.
These are typically small, short-term loans. The National Pawnbrokers Association estimates the average pawnshop loan is $150 with a 30- to 90-day repayment window. Each state regulates how long loans can be and how much interest you can be charged.
The biggest benefit of pawnshop loans is that loan requirements are lenient compared to other forms of lending. You don’t need to provide proof of income or submit to a hard credit pull. You simply need to prove that you own the item you’re using to secure the loan.
Steps to get a pawnshop loan
- Bring your item and prove ownership. The pawnbroker will ask questions to assess its value.
- Receive a loan offer. Expect 25% to 60% of the item’s anticipated resale value, plus fixed interest and possible fees. Pawnshops typically charge between 5%-25% interest per month (60%-300% APR), depending on where you live.
- Accept and get a pawn ticket. This is your receipt. It lists the loan amount, interest rate, fees and repayment deadline. You’ll need it to reclaim your item.
- Repay within the window to get your item back. If you repay successfully, your asset is returned. If you can’t repay, the pawnbroker keeps the item and any profit from selling it, but it won’t affect your credit score. Pawnshop loans aren’t reported to the credit bureaus.
Pawnshop loan example: You pawn a jewelry set worth $500. Assuming the pawnbroker offers 25% of its resale value at a 25% monthly interest rate, here’s what that could look like:
| Item value | $500 |
| Loan offer (25%) | $125 |
| Repayment term | 30 days |
| Interest rate | 25% per month |
| Interest owed after 30 days | $31.25 |
| Total due in 30 days | $156.25 |
If you can’t repay, the pawnbroker keeps the jewelry set.
What items can you pawn, and how much can you get?
Pawnshops accept a range of valuable items, but what you can pawn depends on the shop and applicable law. Common examples include:
| Item type | Examples |
|---|---|
| Jewelry | Gold jewelry, rings and necklaces |
| Precious metals and coins | Gold, silver and collectible coins |
| Electronics | Laptops, phones and gaming consoles |
| Tools | Power tools and other equipment |
| Musical instruments | Guitars, amplifiers and other instruments |
| Watches | Luxury and designer watches |
| Firearms | Eligible firearms, where accepted and permitted by law |
A pawnbroker generally bases a loan offer on what the item could sell for, rather than what you originally paid for it. The offer may also depend on the item’s condition, authenticity, brand, local demand and the shop’s policies.
Consider getting offers from more than one pawnshop before deciding. If you accept a loan, the shop keeps the item as collateral while you repay it.
Pawnshop loan interest rates and fees
Pawnshop loans can be an expensive way to borrow. Interest rates, fees and repayment terms vary by state and shop, so review your pawn ticket and loan disclosures before you agree to the loan.
| Cost or term | What to check |
|---|---|
| Interest rate | The rate charged and how often interest accrues |
| Annual percentage rate (APR) | The disclosed annualized cost of credit, including applicable finance charges |
| Other fees | Whether storage, service or other fees apply and how much they cost |
| Repayment amount | The total amount required to redeem your item by the due date |
| Renewal or extension costs | Whether an extension is available and what additional charges apply |
| Due date and grace period | When payment is due and how long you have to redeem the item under the contract and applicable law |
Compare the full cost. A monthly rate alone may not show the entire cost of a pawn loan. Ask for the disclosed APR, applicable fees and total amount you’ll need to pay to get your item back.
Check the rules for extensions. A shop may allow you to renew or extend your loan, but doing so can add interest or fees. Ask whether an extension reduces the amount you borrowed or only gives you more time.
Know when you could lose your item. If you don’t repay the loan or redeem the item within the time allowed by your agreement and applicable law, the pawnbroker may be able to take ownership and sell it.
Before accepting a loan, make sure you understand the total cost and have a plan to repay it.
If you can qualify for a personal loan, you may be able to get a better deal than with a pawnshop loan. While the interest rates on pawnshop loans can extend up to 60%-300% APR (5%-25% per month), the average personal loan APR is 23.32%, according to LendingTree.
When do pawnshop loans make sense?
Most of the time, you’ll be better off applying for a personal loan through a traditional lender. Often, personal loans can help you save money, build credit and access more funding than pawnshop loans. Still, there are a few occasions where choosing a pawnshop loan may make financial sense, including:
- You need fast cash: Some personal loan lenders offer quick loans for fast cash. However, if you don’t want to undergo a credit check, a pawnshop loan can help you access funds in a matter of minutes without consideration for your credit.
- You only need to borrow a small amount: Since you’re only borrowing a percentage of an item’s value, pawnshop loans typically have fairly small loan amounts. If you need to access hundreds or even thousands of dollars, you may need to look into alternative options.
- You’re okay with using an item as collateral (and potentially losing it): If you are unable to pay back your pawnshop loan by its due date, the pawnbroker could sell your asset. If the item isn’t important to you, it may be worth the risk. But if you value your asset and aren’t positive you can repay a loan, you may want to look elsewhere.
- You’re unbanked: When you don’t have access to a bank account, getting funding through traditional channels can be much more difficult. In this case, pawnshop loans can provide you with the necessary funding and be a more affordable alternative to payday loans. Plus, it won’t affect your credit.
Pros and cons of pawnshop loans
Pros
- Easier to qualify for: Only need proof of identity and ownership. No income verification or credit check.
- Quick cash: Funds available same day, often within 30 minutes, faster than most traditional lenders.
- No credit impact: Pawnshop loans aren’t reported to credit bureaus, so defaulting won’t hurt your credit score.
Cons
- Risk of losing collateral: If you can’t repay, the pawnbroker keeps your item and the profit from selling it.
- Small loan amounts: Small loan amounts: You’ll only receive 25% to 60% of your item’s resale value, so large funding needs won’t be met.
- Can be expensive: Interest rates can be much higher than other financing options, including personal loans.
Alternatives to pawnshop loans
If a pawnshop loan isn’t the right fit, here are some options worth considering:
- Sell your items: A private buyer on OfferUp or Facebook Marketplace may pay more than a pawnbroker, and there’s nothing to repay.
- Save up in an emergency fund: Takes longer, but it keeps your assets safe and avoids fees and interest entirely.
- Consider a payday alternative loan (PAL): Short-term loans offered by credit unions with APRs capped at 28%. You must be a credit union member to apply.
- Download a paycheck advance app: Apps like Chime, DailyPay or Earnin let you access money before payday. Just be sure to research an app’s fees before getting started.
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Use a buy now, pay later (BNPL) program: If you’re making a purchase, apps like Affirm and Klarna let you split the cost into installments.
Just note that 47% of BNPL users have paid late in the past year, per a LendingTree survey, so only use it if you’re confident you can keep up with payments. - Request a due date extension: Some utility providers and creditors offer forbearance programs that let you extend the grace period for your payment. Contact your provider before the due date to ask about the options available.
- Research community assistance: Local charities and nonprofits may have funds available for essential expenses like rent and utilities.
Other ways to manage debt
If you’re dealing with ongoing debt, here are a few steps that can help:
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Make a budget: Tracking your spending can clarify where your money is going and help you allocate income toward paying down debt.
- See LendingTree’s full guide on how to budget to pay off debt.
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Follow a debt payoff plan: Methods like the debt snowball or debt avalanche can make tackling multiple debts feel more manageable.
- See LendingTree’s full guide on debt relief.
- Consider credit counseling: A certified credit counselor can help you build a repayment strategy and work with your creditors on your behalf.
Frequently asked questions
The amount depends on the pawnbroker’s assessment of your item, including its condition and expected resale value. Shops can offer different amounts for the same item, so it may help to compare offers.
If you don’t repay the loan, you may lose the item you pledged as collateral. Your right to redeem the item, including any grace period after the due date, depends on your agreement and applicable state law. Contact the pawnshop as soon as possible if you’re having trouble paying.
Pawnshops generally don’t require a credit check, and pawn loans typically aren’t reported to the major credit bureaus. As a result, they generally won’t help you build credit. Ask the pawnbroker about its reporting practices before you borrow.
Pawnshop loans are short-term, but the repayment period depends on the loan agreement and applicable state law. Check your pawn ticket for the due date, any grace period and the amount required to redeem your item. Some shops may offer an extension for an additional cost.
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