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Pawn Shop Loans: Are They Ever Worth It?

While pawn shop loans can be a fast way to get cash with no credit, a personal loan could be a much more cost-effective option.

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By Eric Rosenberg

Written by

Eric Rosenberg

Contributor

Eric Rosenberg is an expert on personal finance. His work has been featured at Business Insider, MSN Money, USA TODAY Blueprint, The Huffington Post, and Yahoo Finance.

Edited by Savannah Plasch

Written by

Savannah Plasch

Editorial assistant, Credible

Savannah is an editorial assistant at Credible. She received her BA in English from UCLA and an MFA in creative writing from Queens University of Charlotte.

Reviewed by Meredith Mangan

Written by

Meredith Mangan

Senior editor, Fox Money

Meredith Mangan is a senior editor at Fox Money and expert on personal loans.

Updated April 17, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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Credible Takeaways

  • Pawn shop loans require a valuable item as collateral.
  • Most pawn shops offer loan amounts of 25% to 60% of your collateral’s value.
  • Be aware that pawn shops have high APRs that can make them one of the most expensive options to borrow money.
  • Pawn shops do not require credit checks. You only need to provide the collateral and your government ID, making them one of the easiest loans to get.

A pawn shop loan is a type of secured loan, meaning you’ll have to provide collateral. You can pawn valuable items that you own, like jewelry or electronics, in exchange for cash. These loans are usually funded the same day, making pawn shop loans incredibly convenient.

However, they aren’t always a good idea.

What is a pawn shop loan?

A pawn shop loan is a secured, short-term loan you can get from a pawn shop. These loans don’t require a credit check or have any specific requirements other than the item you leave as collateral for the loan.

You’ll typically walk away with around 25% to 60% of the pawned item’s value, with the average loan being $75 to $100. If you pay off the loan in a certain amount of time, you can get your item back.

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Be careful!

Pawn shop loans often have higher APRs than other types of loans.

Although rates are not as bad as the typical payday loan or auto title loan, you’ll still pay huge costs and fees for this type of loan.

One pawn shop shared that costs are typically around 20% to 25% interest per month plus any fees. That's the same interest rate many credit cards charge per year, so pawn shop loans should really be considered a last resort for most households.

Some pawn shop loans charge over 200% APR. In Texas, for example, the maximum pawn shop rate is 240% APR.

Pawn shop loan requirements

One benefit of pawn shop loans is how easy they typically are to get. In many cases, you only need a valuable item and a government ID.

Here are common requirements for pawn shop loans:

  • Valuable item: The main need for a pawn shop loan is a valuable item. For example, jewelry, electronics, guns, or vehicles might serve as collateral. If you and the pawn shop can agree on the value and loan amount, it can secure a pawn shop loan.
  • Government ID: Most lenders will require you to show a valid government ID so they can verify you are legally able to take out the loan.

Keep in mind that unlike a conventional installment loan, a pawn shop loan doesn’t require a specific credit score or a cosigner. As long as you can provide a valuable item and a government ID, you could walk out with cash in the same visit.

Check Out: Personal Loan Requirements

What you can pawn

You can pawn almost anything of value. Some common items used for pawn shop loans include:

  • Jewelry
  • Precious metals or jewels
  • Coins
  • Electronics
  • Game systems
  • Musical instruments
  • Guns
  • Motorcycles
  • Cars
  • Collectibles

Learn More: Payday Loan vs. Cash-Advance Loans

Beware of pawn shop loan fees and interest rates

If you decide to take out a pawn shop loan, be sure you fully understand what you’re signing up for. Every state has its own laws and maximums around what pawn shops can charge, but no matter where you live, a pawn shop loan is still likely one of your most expensive options to borrow money.

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Most pawn shop loans charge a monthly interest rate. If you can’t pay your loan back on time, it might roll into the next month, adding another month of interest. As interest adds up, your loan might end up costing more than the item you pawned to begin with.

Here are a few examples of the maximum rates charged by pawn shops in some states:

  • Virginia: 7% per month
  • Florida: 25% per month
  • Illinois: 20% per month
  • New York: 4% per month
  • Texas: APRs up to 240%

*Rates as of March 2024

Before pawning an item, look up your state’s laws regarding pawn shops to ensure your loan doesn’t overcharge.

Learn More: Secured vs. Unsecured Personal Loan

A personal loan could be a better option

If you have decent credit and verifiable income, a personal loan could be a better option than a pawn shop loan.

Personal loans come with much lower interest rates than pawn shop loans, as well as longer repayment terms. They’re available in a wide variety of amounts, such as a $5,000 personal loan up to a $100,000 personal loan.

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Tip

Some lenders allow cosigners on personal loans, which can help you get more favorable terms.

You might be able to get a lower interest rate on a cosigned personal loan than you would on your own.

There are also personal loans for fair credit and personal loans for bad credit that you might qualify for, even without a cosigner.

If you think a personal loan could be right for you, be sure to shop around and consider as many lenders as possible to find a loan that fits your needs.

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All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms

Alternatives to a pawn shop loan

Fortunately, you have other options besides pawn shop loans. Here are some alternatives to pawn shop loans that may offer a better deal:

  • Ask for an extension: If you’re temporarily short on cash to pay a bill, call your creditor to see if you could possibly have more time to pay.
  • Bill payment assistance: Depending on your situation, you could qualify for bill payment assistance through a government program. For example, the U.S. government rolled out several assistance programs in response to COVID-19.
  • Use a credit card: Although credit cards can have high interest rates, you might not pay any interest if you’re able to pay off your credit card balance by the due date. Even if you do have interest charges, you’ll typically pay less than 30% per year, which is much less than many pawn shop loans.
  • Sell your item: Instead of pawning an item with high costs, consider selling it to the pawn shop or through an online site. This way, you’ll have your cash without worrying about paying it back later.
  • Take out a personal loan: Rates on personal loans are typically much lower than pawn shop loans. Depending on the lender, the time to fund for a personal loan might be as soon as the next business day.
Loan type
Average interest rate
Loan amount
Min. credit score
Time to fund
Pawn shop loan
12% to 240% (can be higher depending on the pawn shop)
Generally 25% to 60% of pawned item's value
N/A
Same day
Payday loan
300% to 500% APR (can be higher depending on the lender)
Typically $50 to $1,000
N/A
Same day
Personal loan
Varies
$600 to $100,000[*] (depending on the lender)
Varies
Typically less than 5 business days
[*] With Credible's partner lenders

Pawn shop loans come with incredibly high costs, which should make them a last resort. Generally, personal loans are a better financial decision that will cost you much less in the long run.

Keep Reading: Small Personal Loan

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Meet the expert:
Eric Rosenberg

Eric Rosenberg is an expert on personal finance. His work has been featured at Business Insider, MSN Money, USA TODAY Blueprint, The Huffington Post, and Yahoo Finance.