A Pawn loan allows you to bring in property as collateral for a short-term cash loan. A pawnbroker will appraise your item and offer you a loan amount based on its value. You typically have a set period of time (which varies by state) to redeem your item and pay off your loan, or you can choose to forfeit it. You will have to pay back the loan amount plus interest.

Most pawnshops do not require any credit checks or income verification. However, it is important to keep in mind that if you fail to pay your pawn shop loan, the items you use as collateral will be sold to recover the debt owed to the store.

Pawn Loan: Understanding How It Works

Typically, pawn shop loan amounts are small and are meant to cover emergency expenses only. If you need a larger sum of money, other options may be better for you, such as a personal loan, or even a higher credit card limit or cash advance.

While it’s true that pawn shops don’t require a credit check, many of these companies charge very high interest rates. Those high rates make the loans very costly, and in some cases, they can harm your credit score if you fail to repay. On the other hand, personal loans are reported to credit reporting bureaus and on-time payments can help you improve your credit score. In addition, a personal loan is often much less expensive than a Pawn loan.