Pawnbrokers let you borrow money in exchange for your valuables. You’ll be able to get the item back if you repay the loan and interest on time, otherwise it’ll be sold.
Pros and cons of pawnbrokers
Pros
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If you have a poor credit score, it might be easier to borrow from a pawnbroker than another lender, and there might be fewer credit checks.
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It’s quick – normally you’ll have your money the same day.
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A pawnbroker should let you collect your items at any time and only charge interest for the time you’ve borrowed the money.
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If the item is sold and there’s a shortfall, the pawnbroker won’t usually ask you for this (but check whether this will be the case).
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If you need more time to repay, the pawnbroker might agree to extend the term, although they can refuse. They’ll normally expect you to at least pay back the interest you owe.
Cons
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You can usually only borrow a percentage of the value of the item you want to pawn. For example, if your jewellery is worth £200, you might only be able to borrow £100.
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You can expect to pay a pawnbroker a higher rate of interest than you would for a high-street loan, but it would normally cost you a lot less than a short-term or payday loan.
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You’ll usually be expected to repay the loan in one payment rather than in instalments.
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If you borrowed up to £75 and you cannot repay the loan, ownership of the item will pass automatically to the pawnbroker. If the loan is over £100, the pawnbroker must tell you before they sell it.
If you’re facing higher living costs, find out about extra sources of income and support in our section Help with the cost of living
How pawnbrokers work
If you want to use a pawnbroker, make sure they’re a member of the National Pawnbrokers’ Association (NPA), which has a code of conduct for members. This is what you can expect:
- The pawnbroker values your item (known as a ‘pawn’ or ‘pledge’), so make sure you know its value before you take it in.
- You and the pawnbroker agree what amount can be loaned against your item and the interest charge for the loan. You might be quoted a monthly or daily interest rate, although the pawnbroker must also show the annual interest rate and the APR (the annual percentage rate).
- You’ll be given a credit agreement to sign with details of your arrangement – check this carefully and ask questions if you don’t understand anything. The pawnbroker should also give you a ‘Pre-contract Credit Information’ form – ask for this if they don't.
- Unless it’s part of the credit agreement, the pawnbroker will give you a separate pawn receipt which you’ll need to keep to prove you own the item.
- Once agreed, you have up to six months to take back the item and pay the interest. If you cancel during the 14-day cooling off period, you’ll just need to pay interest for the number of days that has passed.
- If you don’t repay the loan on time, the pawnbroker can sell your item to cover the amount borrowed plus interest. If it sells for more, the extra money should be given to you.
What happens if you lose your receipt
If the amount you borrowed was £75 or under, the pawnbroker can give you a standard form to complete. This states you’ve lost the ticket, but the items are yours.
For loans over £75, or if they won’t accept the form, you’ll have to go to a commissioner for oaths – such as a solicitor – to swear the items are your property. In England and Wales you can also go to a magistrate, or justice of the peace in Scotland.
What happens if your local pawnbroker closes
If it was part of a chain of pawnbrokers, you can try contacting another branch.
You can also call the NPA on 0172 785 8687Opens in a new window or visit their website to see if they’re able to help you reach the pawnbrokerOpens in a new window
How to complain
You can take a pawnbroker to the Small Claims Court but there are fees to pay and there’s a risk the settlement reached might not be what you want.
If you’re not happy with the response from the company or you can’t reach them, you can take your complaint to the Financial Ombudsman ServiceOpens in a new window you can call them on 0800 023 4567Opens in a new window.
Alternatives to pawnbrokers
Borrowing money via a pawnbroker is expensive and might involve losing a valued item as well as costing you money. You might want to consider:
- Salary Advance Schemes - this is an employee benefit that involves taking some or all of your pay before payday. Be aware that you’ll get a reduced payment on payday if you choose this option.
- Credit unions - these usually allow you to borrow a small amount for a short time.
- Community Development Finance Institutions - they offer loans to people who struggle to get credit, but their interest rates tend to be higher than credit unions.
- Bank overdrafts - though be sure to keep within the limit and don’t get default charges.
