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Pawnshops can be a helpful resource for individuals looking to quickly sell valuable items. But did you know that they also offer financial services for consumers who need to borrow money? It’s called a pawn shop loan. Keep reading to learn more.

Can You Get A Loan From A Pawn Shop?

Yes, certain pawnshops offer loan products for consumers who either need cash quickly or who can’t get approved by other lenders. Pawn loans are not the most popular form of alternative financing, especially in Canada. But, a pawn loan is still an option you may want to consider. 

How Does A Pawn Shop Loan Work?

The idea is simple: a pawnbroker offers you a loan for a period of time with a certain amount of interest in exchange for an item of value that acts as collateral. In some cases, the loan period can be extended, but if it is not, and you have not paid back the loan, your item will be put up for sale to cover the cost of your loan.

You will begin by bringing your item to a pawnshop for assessment. The item will be tested for functionality, inspected for condition, and researched for marketability and value. 

How Much Money Can You Get?

When it comes to how much they are willing to loan you, the lower end will usually be the wholesale value, which is the amount they can sell the item in batches to a wholesale merchant in case it doesn’t sell. The high end will usually be a little less than the item’s market value which is how much they can sell it for as an individual item, or the pawnshop’s retail value. Pawnbrokers will usually consult a blue book to determine a market value. 

Pawn Shop Loan Requirements

One benefit of a pawn loan is how easy they are to get. When it comes to getting approved there are two main requirements:

  • Government Identification. All lenders, whether a bank or pawnshop, will require you to provide them with a valid form of government identification. 
  • Valuable Item. In order to secure a pawnshop loan, you need to provide an item that has value (jewelry, electronics, etc.). For security reasons, a holding period will be placed on the item. Pawnbrokers require this in order to mitigate the risk and responsibility of handling stolen items.

Types Of Items You Can Pawn For A Loan

There are numerous items you can pawn for a loan, so long as the item you choose has some monetary value. Generally, people will use the following for a pawn loan: 

  • Jewellery, gold, diamonds
  • Electronics like smartphones, tablets, laptops, cameras, gaming consoles
  • Musical instruments
  • Antiques
  • Power tools
4 Steps To Get A Pawn Shop Loan

How To Apply For A Pawn Loan?

1. Find An Item To Pawn Off

To get a pawl loan, you’ll first need to find an item to offer as collateral. As mentioned above, you can use a number of different items including old phones, jewellery and other items that hold some monetary value. Depending on the amount of money you need, the higher value item you bring, the more money you will be able to get.

2. Compare Pawn Loan Offers

Generally, pawnshop lenders will offer loans up to 20% to 60% of your item’s value. Meaning if you have a gaming console worth $400, you’ll be able to borrow $80 to $240. Since valuations and loan offers can vary by lenders, it’s best to try a few different pawn shops to see who can provide you with the best deal.

3. Negotiate Pawn Loan Terms

Pawn loans typically have short terms that can last from 30 days to a few months. Depending on your financial situation, you can negotiate a term that works for you with your pawnshop lender. Interest rates, on the other hand, will vary according to your personal financial history.

4. Get Funded

Once you’ve come to an agreement with your pawnshop lender, you’ll receive your loan in cash and a pawn ticket. This ticket is required to collect your item once you’ve repaid your loan. If you fail, to repay the pawn loan, the lender can sell your item to recoup the payment.

Advantages Of A Pawn Shop Loan

  • Accepts Any Credit – Pawn Loans do not require credit checks to secure the loan. Whether you have good credit or bad credit, you can qualify for a pawn loan so long as you have a valuable item to pawn. 
  • No-Risk To Credit Score – Unlike regular loans, missed payments do not affect your credit score. Your biggest risk is losing the item you pawn off. 
  • You Can Use Your Item To Pay Your Loan – If you don’t have the cash to pay your loan, you could always “sell” your item to the lender by defaulting on the loan. 
  • Instant Cash – Getting a pawn loan is easy, simply visit your local pawn shop with an item that holds some value and ask if you can get a loan. If the pawnshop deems your item valuable, you’ll be able to walk away with cash in hand. 

Disadvantages Of A Pawn Shop Loan

  • Costly – Interest rates on pawn loans are generally more expensive than personal loans. For example, if you’re charged $15 in interest and fees on a $100 loan for 60 days, your APR comes to 91.25%.
  • Profits Aren’t Spilt – If your lender sells your item for $200, and you only owe $50, they may not be required to pay you the surplus.

Looking for a personal loan?


Are Gold Dealers The Same As A Pawn Shop?

Gold dealers typically offer cash for gold, rather than a loan. Moreover, you can only sell gold, silver and other precious metals with most gold dealers. If you have any unwanted, but valuable jewellery, you can sell it to get instant cash.

Gold dealers aren’t the only ones who accept gold for cash, many payday lenders and cheque-cashing services also accept gold for cash. Just remember to have your gold evaluated by a jeweller to ensure you get the highest value for your gold. 

Alternatives To Pawn Loans

If you’re struggling to get a loan due to poor credit or finances, there are still some other options for you. If you need a small loan quickly, these can be some other alternative solutions to a pawn loan: 

  • Get A Payday Loan – A payday loan is a small short-term loan that offers between $100 to $1,500. Payday lenders often have very low requirements, making it a popular option for those with bad credit. They also have very quick turnaround times, which is ideal for emergencies. However, while convenient, it has extremely high-interest rates and fees, and should only be used with caution.  
  • Credit Card Cash Advance – If you have a credit card, you can get extra cash by getting a credit card cash advance. However, do keep in mind that interest rates are very high, usually around 30%. Moreover, interest starts accruing immediately.  
  • Ask Family Or Friends – Typically pawn loans are used to borrow a small sum of money, which can make it easier when asking for help from family or friends. And more often than not, you’ll find your family or friends are more than willing to help. 

What Else Do I Need To Know?

Keep in mind you should read the fine print and understand the terms and conditions. Certain aspects of pawnshops are not dictated by law or regulation and can vary substantially. Make sure you understand the debt you’re taking on and the penalties and fees if you are unable to pay back the loan. Do some quick investigating to figure out the market value of your item, and don’t be afraid to take it to multiple shops for appraisal. Most importantly, make sure to look into municipal and provincial regulations and laws that apply to pawnshops.

Pawn Loan FAQS

What happens if you don’t pay back a pawn loan?

The item you provide acts as collateral for the loan. This means that if you do not pay back your pawn loan on time, the pawnbroker will sell the item to cover your loan. 

What are pawnshop loan interest rates?

Pawn loans typically have interest rates between 5% and 30%. However, rates can go much higher depending on the term of the loan. For example, if you’re charged $15 in interest and fees on a $100 loan for 60 days, your APR comes to 91.25%.

Can I get a pawn loan instantly? 

If you visit a pawnshop with a valuable item and the pawnbroker is able to assess the value of your item on the spot, you may be able to get your loan the same day. 

How large of a loan can I get from a pawnshop?

This largely depends on the pawnshop and the item you provide as collateral. Pawnbrokers usually offer 20% to 60% of your item’s value. Amounts typically range from $150 to $300 but can go as high as several thousand dollars. 

Do pawnshops check credit for loans?

No, pawn loans do not require a credit check.
Priyanka Correia avatar on Loans Canada
Priyanka Correia

Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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