If you have any valuable possessions, you could use them to acquire a pawn loan.
A pawn shop is a great place to sell your items for cash, but if you’re not interested in selling, a loan from a pawn shop is a quick way to get extra cash. All you need is something valuable — like a laptop or piece of jewelry — that the shop can use as collateral.
Though pawn loans can be relatively expensive, they often don’t require a credit or background check.
What is a pawn loan?
A pawn loan involves you putting up something valuable as collateral for the money you borrow. They are typically for small amounts, $150 or less, and you’ll have to pay back the principal plus interest, which can vary from as low as 10% to higher than 200% depending on where you live.
The shop won’t sell your valuables while the loan is active, but if you fail to repay, they will be kept and possibly sold in the future. Like all loans, it’s important to know the due date and pay on time. If you do, a pawn loan is a quick and simple way to get cash without worrying about past credit mistakes.
How pawn loans work
These are the basic steps to a pawn loan:
- Take an item to a pawn shop to use as collateral. If your have something that’s worth a few hundred dollars, a pawn shop is likely to consider it for collateral.
- Consider the loan amount the pawn shop offers you. You’ll get a loan for a percentage of your item’s value, which is generally between 25% and 60% of the resale value. It’s a good idea to shop around when taking out a pawn loan, as some shops may offer you more for an item than others.
- Agree to the loan terms. Loan terms can vary between 30 days to a few months, and the interest you pay on your loan depends on state laws and your personal history with the pawn shop.
- Leave the pawn shop with your cash and pawn ticket. You’ll need that pawn ticket in order to collect your item upon repayment, so we recommend taking a photo of the pawn ticket as backup. The pawn ticket will include any fees, the loan term, the grace period, and the final date at which you’ll be in default of your loan.
- Pay back your loan. If you repay your loan successfully, you get your item back. If you fail to repay your loan, the pawn shop sells your item to collect on the loan.
What can I pawn?
Common items people pawn include:
- Musical instruments
- Photography equipment
- Current electronics
Pros and cons of pawn loans
- Quick to obtain. You don’t have to go through a lengthy process to get a pawn loan. Simply bring in a valuable item and ask for a loan.
- No credit check. Because your loan is backed by your item, you won’t be screened for good credit.
- You can surrender your item to pay back your loan. If you default on repayment, your credit score isn’t typically affected and you won’t be on the hook for payments. The pawn shop simply keeps your item.
- Can be relatively expensive. Finance charges and interest rates for a pawn loan typically run between 5% to 25% a month.
- You may not be reimbursed for the surplus. If you don’t repay your loan in time, the pawn shop may sell your item. Even if your item is worth more than your loan amount, the shop may not be required to reimburse you for the profits.
- Additional fees. Beyond interest charges, you may also pay fees for insurance, storage and more.
How does the cash for gold system work?
You’ve likely seen advertisements online or on TV about cash for gold. The process is rather simple, but you should be aware of the potential risks before you sell your old or unwanted jewelry.
- Step 1: Gather all your old jewelry. This includes your rings, necklaces, bracelets and broken pieces. You may also be able to sell non-jewelry items like tooth fillings or old coins.
- Step 2: Research current market value prices. Gold and silver prices fluctuate daily, so you’ll want to know how the market is doing before you visit your local pawn shop to make sure you’re getting the most out of selling your things.
- Step 3: Have your old jewelry appraised. If you have an unbroken piece or a nice set containing other valuable materials (like pearls, gems or opals), you should visit a jeweler and have them estimate how much your piece may be worth. This will help you avoid buyers low-balling your offer or you selling something valuable.
- Step 4: Visit a pawn shop or look up online buyers. Your options aren’t limited to these, however. Many payday loan stores and check-cashing services also offer cash for gold. Do your research and read reviews before selling.
- Step 5: Get an offer. The buyer will give you an offer based on the bullion value and karat of your gold/silver. You can accept it then or ask for time to consider it. There’s nothing wrong with visiting multiple pawn shops and comparing offers to find the one that will get you the most cash.
- Step 6: Agree to the offer. If you like what you hear, you can often get paid the same day for your old jewelry. Depending on what you sell, you could leave the store with a nice chunk of change in your pocket.
- Warning: There have been reports over the years of online buyers running scams. They may use the logo of a reputable dealer or simply pay fractions of a percent based on what your gold is worth. Always read reviews about cash for gold dealers and make sure the business is legitimate. Until there is a better system in place, it may be worthwhile to visit a storefront so you can be sure your valuables are safe from scam artists.
Pawn loan alternatives
Since pawn loans can be expensive, consider a few other options first:
- Ask friends or family for help. You’ll likely find they are more than willing to help you out in a financial crisis. Instead of paying expensive interest charges, you may be able to get a loan for free.
- Call your bank or credit union. They often offer short-term loans at great rates.
- Contact your creditors. If you need a pawn loan to cover bills that you owe, get in touch with your creditors or loan servicer to ask for more time. They may be willing to work with you to extend your due date or pay off your debt in installments.
- Make extra cash in your spare time. If you have time, consider a side gig to earn extra money. Car and house sharing, selling unwanted items and market research are just a few options.
- Get a short-term loan. With a short-term loan, you can borrow a small amount of money and repay it fairly quickly. Unlike pawn loans, short-term loans are unsecured, meaning they don’t require collateral.
Short-term loans to consider if you don’t want a pawn loan
Pawn loans can be a quick way to get extra cash, but because they can be relatively expensive, you may want looking at other options first.