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Should You Take a Pawnshop Loan?

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Should You Consider A Loan from a Pawnshop?

Pawnshop loans are less expensive than payday or title loans in situations where you require fast cash. Still, consider alternatives first.

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Last updated on July 22nd, 2021.

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Table of Contents

Table of Contents

Payday lenders, title lenders and pawnshops all market their services to borrowers who lack other options for quick cash. Of all three, the pawnshop loans tend to be the least harmful.

The rates of interest on pawnshop loans vary by state and are usually presented as fees, but it’s better to look at loans by annual percentage rates. Although payday loans and car title loans are able to easily exceed 400 percent APR however, the pawnshop loans could be as high as 200 percent APR.

Pawnshop loans are a costly option to get money but if you have no other options and require money immediately the pawnshop loan is better than an or .

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How pawnshop loans function

To get an pawn loan, you go to a pawnshop with something you own that you’re willing to give as collateral. The staff will evaluate the worth of the item, its condition, and resale value and decides if they want to grant the loan.

Nolo.com, a website that provides legal advice, estimates pawnshops will lend you about 25% – 60% of the resale value. It can pay to shop through to compare rates from a variety of Pawnshops as quotes can differ substantially.

If you decide to accept the loan and then walk away with the cash along with a pawn certificate, which you’ll need to get your item back. It is possible to take a photograph of the ticket and email it to yourself to keep it in case you misplace it.

Because you left collateral with the lender, a loan that is a pawn loan does not require a credit screening however, the borrower must be years old or older and show proof of your identity. Pawnshops keep in constant contact with law enforcement officials to avoid dealing in stolen goods, so the shop may need proof of purchase or ownership of the item.

The types of items you can pawn differ according to the store and location. High-demand items typically include jewelry electronics, firearms, instruments and tools.

Then, you return within the agreed-upon time generally 30 days to 2 months, to pick up the item and repay the loan (plus charges as well as interest). Fees vary by state and may include insurance as well as storage costs.

If you can’t repay within the original term then you might be able to extend or renew the loan. If you’re unable to pay back the loan, the pawnshop sells your item to get its cash back.

The typical loan at a pawnshop loan is about $150 and can be repaid within 30 days, according to the National Pawnbrokers Association.

Nerdy Tip

An installment loan may be a more economical way to borrow money. These loans permit you to take out the cash in one go and pay it back in fixed monthly payments over the course of years or months, rather than weeks. There is no need to provide collateral, and loan amounts tend to be greater, while interest rates are generally lower. The majority of lenders require a credit assessment to be able to approve your application, however, you can find for bad credit.

The pros and pros of pawnshop loans

Pros

Pawnshop loans could be appealing to consumers who can’t qualify for a traditional loan.

They might cost less that the penalties for being late by a credit card or a reconnect fee on utilities.

They usually cost more than a conventional loan, but they receive the cash faster and don’t require an approval for credit.

There’s no legal requirement to pay back, therefore your credit score will not suffer in the event that you fail to repay the loan and you won’t be contacted by debt collectors or even sued. The only consequence, if you don’t repay, is losing your item.

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Cons

The main drawback is the cost. A rate of 36% is typically considered by experts in personal finance as the top end of affordability for any loan. A pawnshop loan of $100, which costs 15 dollars in charges and is due in 30 days runs about 182% APR.

Around 15% of Pawn loans are not repaid, according to National Pawnbrokers Association, and frequent customers are often the norm.

If you are constantly reborrowing or extending a loan pawn loan or pawning and redemption of the same item over and over it is time to consider a bigger financial solution than this short-term financial patch.

If a pawnshop isn’t able to provide an APR — some have only listed feesor charge interest per month instead of year. Use our calculator on the right to find the APR.

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Alternatives to pawning

Before visiting a pawnshop, consider more affordable alternatives. Most of these options can pay you within a couple of days.

Forbearance on bills: If you’re trying to extend the next pay period, call your utility or other creditor and see if they will extend a grace period.

Payroll advances with no interest: Apps like and Chime will give you an advance on your pay up to two days in advance. Find an app that does not charge charges or interest.

Assistance from the community: If you require to pay for utilities, rent or other necessary expenses consider whether you can find a . Charitable, religious or other community-based groups provide funds to assist people in need.

Selling: If you’re willing to let go of the object you’re willing to let go you can consider selling it to a pawnshop or private buyer. Private buyers will probably cost more than a pawnshop, however it might require a longer time. Either way, a sale will likely net more than an Pawn loan.

Small-dollar loans: Mainstream banks like and provide short-term small-dollar loans to existing customers. These loans are likely to cost less than an ordinary loan pawn loan however, you’ll have to undergo a credit check. You can also get a small-dollar loan from an online lender.

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Personal loan from a credit union or online lender: start around $500. Some lenders may offer lower rates for bad-credit applicants, but you’ll need to be a member before you can apply. The personal loans that are online from lenders can be quicker, but may come with higher interest rates.

See if you pre-qualify for a personal loan – without affecting your credit score

Just answer a few questions to receive customized rates from a variety of lenders.

The amount of the loan

on NerdWallet

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Resolving the debt cycle

After this cash shortage is solved, you can plan to another time. A good place to start is to start saving to fund an . NerdWallet suggests a savings target of $500.

If you’re unsure of where to begin, this is an excellent starting point. If you require help provide basic financial and budgeting advice for no cost.

About the authors: Bev O’Shea was a credit editor at NerdWallet. Her work has been featured on the New York Times, Washington Post, MarketWatch and elsewhere.

Jackie Veling covers personal loans for NerdWallet.

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