Pawn Loans vs. Bank Loans - Choosing the Right Option


 When your personal finances take a hit, a loan can be a safety net to bridge the gap. Whether you need an investment to begin a profitable project or you are awaiting incoming funds, the urgent requirement for cash can arise in many situations. Bank loans are a common option for those looking to fulfil their financial needs. However, if you are looking for fast cash, a bank loan might not fit in with your timescale. This is where pawn loans can come to your rescue. In fact, pawn loans have emerged as tough competitors to bank loans in the recent years. When it comes to choosing between the two, pawn and bank loans, a lot of people find it difficult to decide. So, in this blog, we discuss in detail the difference between bank loans and pawn loans to help you choose the right option.

What does ‘Pawn Loan’

Simply put, to pawn something means to deposit a valuable item with a lender, and receive short term funds in exchange. The payment that you receive depends on the market-value of the asset, which is determined by specialist valuers. Pawn shops accept lots of different items as collateral, including Watches, Gold, Jewellery, Diamonds, Fine Art, Antiques, Silverware, Books and Musical Instruments. In order to retrieve your pawned item, you need to repay the loan amount to the pawnbroker along with pre-agreed interest. Now let us draw a comparison between pawn loan and bank loan.



Bank Loan

Pawn Loan


A good credit score, bank account, proof of income, [or assets like property, a business or investments]. 

A pawnable asset

Approval Process

2-3 weeks (or even more)

Within a day

In case of delayed payment

Penalties, including charges, repossession of assets and impact on your future credit score

The item is sold (worst case scenario)

Application Process

Can be applied within 10 minutes. However, you need to meet the eligibility criteria.

Can be completed within 10 minutes. No credit check required

Effect on Credit Score

Your credit score is affected on repayment of loan

Doesn’t have an impact on your credit score

Why Opt for Pawn Loans?

Clearly, pawn loans do have a different set of benefits to a traditional bank loan. Let us go through some of the benefits in detail.

Pawnbrokers do not check your Credit History


Pawnbrokers accept or decline your loan application on the basis of the value of your asset only.  As the asset is deposited with the pawnbroker as security for the loan, they are not concerned about your credit history. Banks, however, check your credit history to decide if you are eligible for the loan, as you will be personally liable for its repayment.


Your Credit Score Remains Intact


This is another reason why a lot of borrowers prefer pawn loans. Delay or inability to pay your pawn loan doesn’t affect your credit score. In fact, in some cases, a pawnbroker will be more than happy to extend your repayment period with some change in the interest rate. In the worst-case scenario, the pawned item will be sold but this will not impact your credit score. When it comes to bank loans, non-repayment of the amount can have a negative impact on your credit score.

Pawn Loans have an Easy Approval Process


Getting approval for bank loans may take weeks, which is not the case with pawn loans. Approvals for pawn loans are given within minutes. For instance, Unbolted processes your loan within minutes of receiving your asset. The primary reason for such fast approvals is that pawnbrokers have the pawned item in their possession, and this is the only aspect of the application process they need to check to agree to proceed with a loan.


Pawn Loans have an Easy Application Process


Another major benefit of pawn loan over a bank loan is the easy application process. You can apply for pawnbrokers’ loan online from the comfort of your home or office. An in-person meeting is not necessary, and they do not need extensive documentation. Renowned pawnbrokers such as Unbolted only require photos and details of the asset and you will get a loan offer within 24 hours.


Pick whichever suits your circumstances


Both bank and pawn loans have their own sets of benefits. However, pawn loans are a preferable option for borrowers who have a low credit score or need urgent loans.  Make sure you consider both the options before making the final decision.  We hope this blog would have helped you understand the difference between a bank and a pawn loan and now you can make a more informed decision. To know about the items that can be pawned at Unbolted, click here <link>

Unbolted Blog
22 May 2020
Unbolted Team