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Should You Take a Pawnshop Loan?

Pawnshop loans are cheaper than payday or title loans when you need fast cash. Still, consider alternatives first.

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Updated · 3 min read
Jackie Veling
Written by 
Lead Writer & Content Strategist
Kim Lowe
Edited by 
Head of Content, Personal & Student Loans
Nicole Dow
Co-written by 
Lead Writer & Content Strategist
Payday lenders, title lenders and pawnshops all market their services to borrowers who lack other options for fast cash. Of the three, pawnshop loans are usually the least harmful.
Interest rates on pawnshop loans vary by state and typically are presented as fees, but it’s more useful to compare loans in terms of annual percentage rate. While payday loans and car title loans can have APRs of 300% or higher, pawnshop loans may be more affordable, with APRs around 200%.
» MORE: The best ways to borrow money

How pawnshop loans work

All pawnshop loans follow a similar structure: You provide an item as collateral, the shop assesses its value and offers you a loan. You then repay the loan, with interest, to get the item back.
The average pawnshop loan is about $150 and is repaid in about 30 days, according to the National Pawnbrokers Association.
As with any loan, it pays to compare offers since one pawnshop may give you a better deal than another.

Borrowing from a pawnshop

To get a pawn loan, you go to a pawnshop with something you own that you’re willing to leave as collateral. Items you can pawn vary by store and location and may include jewelry, firearms, electronics, collectibles, tools and musical instruments.
The staff assesses the item’s value, condition and resale potential, and 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 the resale value of your collateral. Quotes can vary substantially, so compare offers from multiple pawnshops to find the best one.
Because you’re leaving collateral with the lender, a pawn loan doesn’t require a credit check, but you must be at least 18 years old and show proof of your identity. Pawnshops work with law enforcement to avoid dealing in stolen goods, so the shop may require proof of purchase or ownership of the item.
If you accept a loan, you walk away with the cash and a pawn ticket, which you’ll need to get your item back. You can take a photo of the ticket as backup in case you lose it.

Calculating APR on a pawn loan

The best way to find out if one loan is more affordable than another is to calculate the annual percentage rate (APR). Since it includes fees, APR provides the best apples-to-apples cost comparison across all types of loans and credit cards.
Pawnshops might list fees or give interest per month rather than using APR when referring to the cost of the loan. Use the calculator below to find the APR for a pawn loan by plugging in the fees, loan amount and repayment term.

Repaying a pawn loan

When it’s time to pay the pawnshop loan back, usually in 30 to 60 days, you return to pick up the item and pay off the loan (plus fees and interest). Fees vary by state and can include insurance and storage charges.
If you can’t repay within the original term, you may be able to extend or renew the loan. If you don’t repay the loan, the pawnshop sells your item to get its money back.
Know the risks: Because pawnshop loans have high rates and short repayment terms, they’re best reserved for urgent, one-time expenses. Though they can be less expensive than payday and some other high-cost loans, relying on pawnshop loans over and over risks entering a cycle of debt that’s difficult to break.

Pros and cons of pawnshop loans

Pros of pawnshop loans

  • No credit check: Pawnshop loans may appeal to consumers who can’t qualify for a conventional loan, since they don’t require a credit check. 
  • Quick access to funds: With a pawnshop loan, you get the money right away, so you don’t have to wait for funding like a traditional personal loan. 
  • Failure to repay only results in losing the pawned item: There’s no legal requirement to repay a pawnshop loan, so your credit score won’t suffer if you don’t repay, nor will you be harassed by debt collectors or sued. The only consequence is losing your item.

Cons of pawnshop loans

  • High cost to borrow: The biggest downside to pawning is the cost. Consumer advocates consider an APR of 36% to be the upper end of affordability for any personal loan. A pawnshop loan of $100 that costs $10 in fees and is due in 30 days has an APR of about 122%.
  • May lead to repeat borrowing: About 15% of pawn loans are never repaid, according to the National Pawnbrokers Association, and repeat borrowing is common.
  • Won’t solve deeper financial issues: If you find yourself extending a pawn loan, or pawning and redeeming the same item repeatedly, you may need more than this short-term financial patch.
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When it may make sense to get a pawnshop loan

A pawnshop loan is generally an expensive way to borrow money, and you put your collateral at risk. However, it can be less costly than other no-credit-check loans, like a payday loan or title loan.
If you aren’t able to secure a more affordable borrowing option, a pawnshop loan could get you the money you need quickly without further risking your credit. Just make sure you’re able to repay the loan by the end of the term.
Compare appraisal values, interest rates and loan terms from multiple pawnshops to get the best deal.

Alternatives to pawnshop loans

Before going to a pawnshop, consider more affordable alternatives. Most of these options can deliver funds within a few days.
» MORE: Alternatives to high-cost loans
Selling: If you’re willing to part with the item you’re pawning, consider selling it to a pawnshop or private buyer. A private buyer will likely pay more than a pawnshop, but it may take longer. Either way, a sale will likely net more than a pawn loan, and you won’t have to worry about making a future payment.
Payday alternative loans: A payday alternative loan, or PAL, is a type of small loan offered by federal credit unions that caps the cost of borrowing, making it easier to repay. You’ll need to become a member of the credit union before applying for a PAL.
Small-dollar loans: Mainstream banks like Wells Fargo, U.S. Bank and Bank of America offer short-term, small-dollar loans to existing customers. These loans will likely cost less than a pawn loan, but you may have to undergo a credit check. You can also get a small-dollar loan from an online lender.
» MORE: Best small-dollar loans
Bill forbearance: If you’re not able to pay upcoming bills, contact your utility providers or creditors and see if they will extend a grace period or set you up with a hardship payment plan.
Community assistance: If you need to cover rent, utilities or other necessary expenses, see if you can get financial assistance from a local agency. There may be a charitable, religious or other community-based organization in your area that has resources and funds dedicated to assisting people in need.
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Cash-advance apps: Cash advance apps like EarnIn and Dave can provide an advance on your paycheck a few days early. Look for an app that charges minimal fees or interest.
“Buy now, pay later” plans: Buy now, pay later (BNPL) apps break the cost of a purchase into equal installments, typically due over four to six weeks, with zero interest. This can stretch your dollars further for the month if you’re short on cash, but be sure to repay the installments on time — most of these plans will charge fees for late or missed payments.
» MORE: Best personal installment loans

Breaking the debt cycle

Building an emergency fund is the best way to avoid borrowing high-cost loans, but it can seem daunting if you need cash today. Any amount of money you can save each month, whether it’s $5 or $50, will put you on the path toward building a safety net. That way, you’ll have interest-free money to rely on the next time a financial emergency strikes.
For help building a budget, finding ways to access cash and saving money, contact a nonprofit credit counseling agency. These organizations offer basic budgeting and financial education services, and some services are free.
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