Should You Take Out a Pawn Shop Loan?

For a pawn loan, one must visit the pawnshop using an item you own and are willing to sell as collateral. The staff will evaluate the value of the item, its condition, and its potential for resale before deciding whether or not to take a loan in a pawn shop.

One site that provides legal advice estimates that pawnshops provide you with between 25% – 60% of the value of resales. It’s worth shopping through to compare rates from various pawnshops, as quotes can differ considerably.

How pawn loans work

If you agree to a loan, you’ll leave with cash as well as a pawn ticket which you’ll need to get the item returned. You could take a picture of the ticket and email it to yourself to keep it if you lose the ticket.

Since you’ve given collateral to the lender, Pawn loans don’t require a credit screening, but it is required that you are 18 years old or older and prove your identity.

Pawn Shops have regular communication with law enforcement officials to avoid trading in stolen goods and, therefore, the shop might need documents proving the possession or purchase of the object.

The types of items you can pawn differ according to the store and location. The most popular items include electronics, firearms, jewelry tools, and musical instruments.

Then, you return to the store within the stipulated time, typically 30 days to 2 months later, to collect the item and repay the loan (plus charges plus interest). Fees differ depending on the state and can also include storage and insurance charges.

What if I don’t pay the loan?

If you are unable to repay the loan within the original timeframe, then you might be able to extend the loan term. If you’re unable to pay back your loan in full, the store will sell the item to receive the loan back.

The typical pawnshop loan is approximately $150, and it is paid back in 30 days, as per the National Pawnbrokers Association.

Are there alternatives to pawn loans?

An installment loan might be a better option to get money. They allow you to get the cash all at once and then repay it in regular monthly installments over months or years instead of weekly.

You don’t have to secure collateral and loan amounts are likely to be greater, while interest rates tend to be lower.

The majority of lenders require a credit assessment before they will approve your application, but there are installment loans available that are suitable for bad credit.

Pros and cons pawnshop loan


  • Pawnshop loans may appeal to those who aren’t eligible for a traditional loan.
  • They might be less expensive than the fine for late payment when you pay with a credit card or a reconnection fee for utilities.
  •  They usually cost more than a traditional personal loan. However, you will also get your money quicker and don’t have the requirement for a credit report.
  •  There’s no legal obligation to pay back. Therefore your credit score won’t be affected if you fail to repay the loan. Nor will you be contacted by creditors or be sued. The only consequence if you fail to repay the loan is to lose the item.


  • The main drawback is the price. A rate of 36% has been usually acknowledged by financial experts as the top end of the affordability range in any kind of loan.
  • If you are constantly reborrowing or prolonging a pawn loan or pawning and reclaiming the same item over and over again, You need more than this temporary financial patch.
  •  Some pawnshop doesn’t provide an APR. Some have only listed fees or charge interest every month instead of a year. Use this calculator to calculate the APR.

Other alternatives to pawning

Before you visit a pawn shop, you should consider other economic alternatives. The majority of these options will provide funds in a few days.

Bill forbearance

If trying to delay the next pay period, call your credit card company or utility and ask them to prolong a grace time.

Payroll advances with no interest

Apps such as Earnin and Chime will give you an advance on your pay for up to 2 days. Choose an app that does not charge costs or interest.

Assistance from the community

If you need to pay for rent, utilities, or other essential expenses, consider whether you can obtain a loan or help from a local organization.

The charitable, religious, or other organizations that are based on community have funds dedicated to helping people in need.

Selling stuff

If you’re willing to let go of the thing you’re offering to sell, you can consider selling it to a pawn shop or a private buyer. Private buyers will probably cost more than a pawn shop. However, it could require a longer time. In any case, the sale is likely to bring more profit than the one-time loan from a pawnshop.

Small-dollar loans

Major banks such as the U.S. Bank and Bank of America provide short-term, small-dollar loans to customers who are already clients. The loans are likely to be less expensive than a pawn. However, you’ll need an examination of your credit. It is also possible to get small-dollar loans via an online loan provider.

The best small-dollar loans

Personal loans from an online or credit union lender Personal loans from credit unions begin at around $500. They may provide low rates to bad credit applicants, but you’ll have to join first. Personal loans offered by online lenders are more convenient. However, they could have higher interest rates.


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