How Do Pawn Loans Work?

February 25, 2020 - Pawn Resources

A pawn loan is a cash loan that is borrowed against an item of value which is used for collateral.

It is a quick and easy way to borrow money without effecting your credit score.

What does that mean?

To acquire a pawn loan, you need to offer an item of value to the pawn shop. The pawn shop holds your item in storage with your name on it and gives you cash and a set of payment due dates.

If you pay off the loan (including interest) by the due date, you get your item back.

You may also pay the interest and extend the loan. The pawn shop will continue to hold your item, and you will owe more interest on the loan until you pay it off in full.

What does it cost?

The interest charged for pawn loans varies by state. It could range from 2-25% per month, or even more. When you visit a pawn shop near you, be sure to ask the pawnbroker what the state law is.

If you fail to pay off the loan (or if you decide not to pay off the loan), then the pawn shop has the right to sell your item to anyone. Losing your item can often be the most “expensive” cost of a pawn loan.

Is it safe?

Yes, generally. There can occasionally be pawn shops that try to swindle you in various ways, most pawn shops are licensed and have to follow a variety of rules to protect consumers.

PawnGuru is 100% Free!

If you are looking to get a pawn loan from a local pawn shop near you, be sure to check out Just snap a photo of your item with your smartphone to submit it on PawnGuru, and start receiving multiple cash offers. Pawnbrokers around the country use PawnGuru and can offer straight up cash, and or a quick cash loan. When you submit an item, like a Xbox, guitar, or leaf blower – clearly describe your item and specify whether you are looking to sell or receive a pawn loan.

Did you enjoy this post? Click here to read about Heritage Jewelry and Loan in Texas!
Jordan Birnholtz
Jordan Birnholtz

Jordan Birnholtz is the cofounder of PawnGuru. An alumnus of the University of Michigan, Jordan started PawnGuru in 2015 with Jon Polter, David Stiebel, and Jessica Zahnd. When he's not working at PawnGuru, Jordan volunteers his time to support undergraduates in building socially-responsible businesses and organizations through Optimize, a program at the University of Michigan.

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Avatar for Mark Leach

Mark Leach

March 27, 2015, 11:42 PM

I need some cash, and I think that they best way to get it is by going to a pawn shop. I would consider doing a pawn loan, as long as it is taken care of while I make payments to get it all back. That is a really smart idea for pawn shop owners.

Avatar for John


September 13, 2016, 6:55 PM


Avatar for Tyrone Gill

Tyrone Gill

August 7, 2015, 10:57 AM

Pawn shop are always a great help to those who are in need of immediate money.

Avatar for John


March 17, 2017, 6:26 PM

I have a good friend that is in need of a quick loan, but doesn’t think he qualifies at a bank. From what the article says, it seems like getting a loan from a pawn shop is a fairly easy process. I’ll be sure to mention that a loan from a reliable pawn shop could be a good option for him to get the money he needs right now.

Avatar for LNWeaver


June 13, 2017, 11:28 PM

I hadn’t heard of pawn loans before. Using items as collateral sounds like a good way to establish enough trust for a loan. A good credit score can do that too, but if your score is below 600 a pawn loan could work instead.

Avatar for Theordore Winston

Theordore Winston

October 26, 2017, 2:36 PM

I never took into account the fact that we could extend the loan in pawn shops, I always think that we have to pay the loan along with the interest on the said date. I always pawn my watch and other gold necklaces whenever I’m in an immediate need of money never thinking that I could extend the loan.

Avatar for Jeremy Thompson

Jeremy Thompson

November 23, 2017, 1:01 AM

It’s reassuring to learn that as long as the pawn shop is licensed it’s safe for us to pawn our items there. I am actually looking into pawning my mother’s engagement ring to have enough cash for her operation this Friday. Hopefully, I can find a reputable pawnshop nearby so that I can claim it after I get my paycheck. Thanks for the informative read about pawn loans!

Avatar for Lilia Robberts

Lilia Robberts

June 26, 2018, 3:51 PM

Until reading this article I didn’t know how pawn shops worked! Now I know that I need a valuable possession, and they give you money for it, and they don’t get rid of it right away! I need money fast, so I will have to look more into going to a trusted pawn shop!

Avatar for Sam Li

Sam Li

April 9, 2019, 8:25 PM

I appreciate what you said about interest rates and how they vary by state. I would say that obtaining a pawn loan is worth it when buying luxury items, like jewelry pieces. My friend is looking to obtain a pawn loan, so I’ll suggest that he get in touch with a pawn shop with a prominent reputation.

Avatar for Thomas Peterson

Thomas Peterson

July 19, 2019, 2:16 PM

I thought it was helpful that you mentioned that you can have a pawn shop hold an item of value when you take out a loan and you can get a quick cash loan. I have inherited some old jewelry and I haven’t been too sure what to do with it. Maybe I’ll have to look into some loans for jewelry and see what I can do with that.

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