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Unbolted's Guide to Pawnbroking

What is a pawnbroker?

A pawnbroker is a lender who offers you a loan secured against your valuables. They hold your asset as security for the loan, which can be redeemed once the full loan amount has been paid.


What is the process of pawning like? How long does it take?

Traditional pawnbrokers have a shop with a walk-in counter. When you take your valuables to the shop they get your items valued, and the loan amount offered is based on the pawnbroker’s valuation. The process can take any time between a few minutes, to a few days if it’s a higher-value asset that requires a more extensive valuation.

  • You bring in or send an item by post to pawnbroker.
  • The pawnbroker will value your asset and make you an offer.
  • You can then accept or negotiate the offer.
  • If accepted, the asset is kept in storage by the pawnbroker until the loan is paid back.
  • At the end of the loan term (usually 3-6 months), the total loan amount and interest will be paid to recover the asset. If the full loan amount isn’t paid, the pawnbroker will proceed with selling the item to recover the loan amount.
How do pawnbrokers value items?

Pawn shops value your items based on the second hand market value, or what an item would fetch if sold at a public auction or sold directly to the trade (e.g. dealers) by private treaty. Depending on the nature of the asset being pawned, some lenders will use external specialists to get a better estimate and therefore be able to offer you the largest possible loan.

What items can you pawn?

Pawn brokers accept a wide range of assets and valuables as security for loans. Historically families would pawn their Sunday best clothes to buy essentials during the week, and this method of putting luxury goods aside for an injection of cash is still prevalent. Luxury assets such as jewellery, gold and watches are more common to borrow against. Specialist lenders will consider a wider range of exotic assets such as fine wine, designer handbags, art and antiques, prestige cars, musical instruments, etc., while high-street pawnbrokers will now often consider lending against less traditional assets such as electronic devices.

What are the advantages of pawnbroking?

Below are some of the advantages that pawnbroking offers when compared to other types of loans:

  • Fast and easy loan solution
    As long as you have an asset you can loan against, you can obtain a loan in less than 24 hours. There is usually much less paperwork required than other alternatives, as you often only need proof of ID and in some cases proof of purchase, to verify the asset’s authenticity.
  • No credit checks
    Pawnbrokers don’t run any credit checks as they lend money against your assets.
  • No impact on credit history
    If you can’t repay the full loan amount, your pawned asset will be sold by the lender to recover any potential losses and your credit history won’t be affected.
  • Retain ownership of your assets
    It is a great way of releasing the value in your valuables without having to sell them. It is therefore very important to understand the full repayment amount, including interest rates.
  • Early repayments
    You can usually recover your pawned items early if you pay back the full loan amount and interest up to that day. This is quite handy if you have a special event and would like to wear those gold earrings or luxury watch that you pawned.
What are the disadvantages of pawnbroking?
  • Higher interest rates
    Pawnbrokers usually charge some of the highest interest rates, with some high-street lenders charging 150% APR (annual percentage rate).
  • Short-term loans
    The standard term for pawnbroker loans is 6 months, although it can be extended or loan contracts renewed by repayment of interest.
  • Risk losing your item
    The item you pawn is used as security, and in the event you can’t repay the loan, the item may be sold to recover the dues.
Alternatives to pawnbroker loans?

Below are some of the main alternatives to pawnbroker loans.

  • Bank loans, Overdrafts and Credit Cards:
    They offer lower interest rates than a pawnbroker loan, although this may not be an option if you have poor credit rating or no credit history at all. The amount you can borrow will also depend on your monthy income and credit history.
  • Payday loans:
    They are traditionally one of the most expensive means of borrowing, as APR can exceed 1,000%.
  • Selling your items:
    Selling your valuable to reaise cash, either through online selling platforms such as Ebay or at an auction may be a good option if you own high-value assets that you are not attached to senitmentally. It is important to note that auction houses will generally charge over 30% in commission for selling an item for you and total cost of selling through online platforms may exceed 20%.
Are pawn shops safe?

Yes. Pawn shops are regulated by the Financial Conduct Authority, are generally safe and will have secure storage areas and insurance for your valuables. However you need to make sure that you are dealing with a proper and regulated business.

Can you repay a pawnbroker loan early?

Yes. You can usually pay a pawnbroker loan at any time. However you should read through the terms and conditions carefully when taking our a loan, as with some high street pwnbrokers you may end up paying additional interest of up to two months although you redeem the loan early.

Can you pawn more than one asset at a time?

Yes. It is very common for people to pawn multiple items. For example, a borrower may choose to use 2 gold sovereign rings and a diamond ring as collateral if they have a specific loan amount they are after. The lender will then make a loan offer based on the total value of all individual items.

Do pawnbrokers carry out credit checks?

No. Usually pawnbrokers will not carry out credit checks as the loans are secured against the value of your assets.

Can you get a pawn loan if you have poor credit rating?

Yes. The loan amount offered usually depend purely on the value of the items used as collateral, and your credit rating won’t be taken into consideration.

If I don’t repay my pawnbroker loan, will it impact my credit rating?

No. Your credit rating will usually never be affected as pawns shops do not report back loan defaults to credit agencies.

Do pawn shops give loans

Yes. Pawn shops provide loans against the value of your assets.

Do you get more money pawning or selling?

You will receive more money by selling your item, if you aren’t in a rush and are happy to say goodbye to your valuables. Unless selling privately, most platforms will charge a hefty sales commission (usually 20% to 35%), so it is important to keep that in mind.

How do pawn shops make money?

Pawnshops are in the business of lending monies and make money through the interest they charge on sums lent out.

How long do you have to pay back a pawn loan?

All pawnbroker loans are usually for a term of 6 to 7 months.

How much can you borrow from a pawnbroker?

You can borrow any amount from a pawnbroker, as long as you have enough assets to use as collateral. Some high-street pawn shops will do loans from as little as £50, whilst other specialist lenders may do loans of over £1 million against fine art or other luxury items.

How old do you have to be to pawn something?

In the UK you need to be 18 or older in order to pawn any items.

Pawning vs selling your assets

Pawning an asset can be seen as a temporary sale – whereby you receive funds for handing over your item to be safely and temporarily held by a pawnbroker. You are given a certain amount of time to ‘buy back’ the item, and if you are unable to do so, or decide that this is not the best option for you financially, you can walk away from the loan agreement and your asset is permanently sold. Selling, however, is a final and permanent agreement. You will receive more cash by selling your item outright, as a pawn loan will only be a percentage of the value of your item, and it accumulates interest which needs to be paid off from the sale proceeds. However, pawning the item allows you to retain a valuable asset, and gives you the flexibility to unlock funds quickly.

What are some things we need to take into consideration before going to a pawn shop?

You should consider whether it is the right option for you, rather than selling your item outright. If you have sentimental attachment to your item, or need to unlock some quick cash, then pawning allows you the flexibility to sort out your financial situation and keep your item. It is very important also to look at the interest rates, and understand the process for renewing or defaulting a loan at the end of the loan term, and how your item will be sold if you default on the loan.

What happens if you cannot repay your loan?

If you get to the end of your loan term and you cannot afford to pay back the funds you borrowed, the pawnbroker will look to sell your asset to reclaim the funds owed. Some companies offer a renewal option, whereby you pay off the accumulated interest on the loan, and they can offer you an extension before the item is sold.

What interest rate do pawn shops charge?

The interest rates for pawnbrokers vary, but you can usually expect to pay between 3% and 10% per month, dependant on the size of the loan and the individual company. They are higher than a bank will charge for a loan, but less than payday loan providers. Some pawnbrokers charge interest monthly, and some daily – however you should expect to be quoted an annual interest rate and APR.

What things do pawn shops buy?

Pawn brokers traditionally bought luxury assets like jewellery, gold, watches and similar small valuables, although nowadays a high-street pawnbroker will also consider tech and other household goods. Less obvious assets such as cars, wine, handbags, art and antiques are all areas which will be considered by pawnbrokers.

What percentage does a pawn shop give you?

Pawnbrokers offer you a percentage of the resale value of your item as a loan. They consider how much they can sell the item for, the desirability of the piece and its overall value. This percentage can vary from 20% - 80%, depending on the pawnbroker and your item.

Do you need a licence to be a pawnbroker?

Yes. All pawnbrokers in the UK should have a Consumer Credit Licence, which is issued by the Financial Conduct Authority (FCA).

What is LTV?

LTV stands for loan-to-value. This is the term used to describe the percentage the pawnbroker is willing to lend out of the total value of your item. If you are pawning a Rolex watch worth £3000 and get a loan offer of £2100, then the LTV is 70%.

Online: What are the main differences between traditional and online pawnbrokers?

While in essence, traditional and online pawnbrokers are the same type of business, there are a few differences in how they operate.

  • Online pawn shops offer the chance to raise cash against an asset from any part in the country, without having to visit any physical shop. The main advantages in doing this is that you can look for the lowest interest rates in the UK, and are not subject to your local pawn shop interest rates.
  • Online pawnbrokers are considered to be more private than high-street lenders, as you are only required to send your assets by post and the transaction occurs online.
  • High-street pawn shops can provide you with a loan on the same day, whilst an online pawnbroker needs to receive the item by post first, and this may delay the process. However, you can use same-day delivery and to make the process faster.
How do online pawnbrokers work?

The typical process for pawning an asset online is as follows.

  • Submit your application online, providing all required details. These will generally include pictures and a description of the asset you want to pawn.
  • Receive an indicative offer. Lenders will usually give you an indicative quote, so you have an idea of how much you may be able to borrow.
  • Courier your asset. It is recommended to always send any valuables using a tracked and insured courier.
  • Receive final offer. Your items will be inspected and valued in person once they have been received by the online pawnbroker. Based on their valuation, they will issue a final loan offer.
  • Accept offer and receive funds. Once the offer is accepted, you can expect to receive the funds in your bank account within 3 hours.
How do you send your items to an online pawnbroker?

For any items that can be sent by post, you may choose to use the guaranteed and tracked service of Royal Mail. It is advisable to ensure that the items are insured in transit either by yourself or by the pawnbroker. Other larger items may require specialist couriers, depending on size and weight restrictions.

Is online pawnbroking safe?

Yes. Online pawnbroking is as safe as traditional pawnbroking. It is important to choose an insured method of transportation when sending any valuables, to cover any potential loss or damage in transit.

Can you pawn anything online?

Yes. You can usually post small items via Royal Mail or other insured couriers. For larger items such as a grand piano, for example, the pawnbroker will usually arrange for a specialist to pick the item up.

Does online pawnbroking affect your credit rating?

No. In the same way as traditional pawnbroking, online pawbrokers won’t run credit checks and any unpaid loans won’t affect your credit rating.

How quick is online pawnbroking?

The speed in which you can receive a loan with an online pawnbroker will usually depend on how quickly you can get your assets sent over to them. Many couriers now offer same-day delivery, so you can potentially receive a loan on the same day.