What if I can’t repay my pawn loan?

Man in a suit scratching his head with a confused look.

If you are considering taking out a pawn loan, you are probably wondering what might happen if you can’t repay it. Unlike a traditional loan, if you find yourself unable to repay a pawn loan, your credit will not be impacted, and you’ll never find yourself bombarded with calls from a collection agency.

A pawn loan is a collateral loan, meaning your loan is backed by whatever collateral is used to secure the loan, often diamond jewelry, platinum jewelry or gold.  If you can’t pay back the money for your loan, or you simply choose not to, the only consequence is loss of your collateral. The vast majority of people who take out pawn loans are able to pay them back. The National Pawnbrokers Association reports a loan redemption rate of 85%.

The process of taking out your loan is fairly simple. Your pawnbroker will collect your collateral and issue you a loan and ticket.  Your collateral will then be stored in a secure storage facility throughout the term of your loan, which is usually around four months. You can repay your loan at any point during the four months, paying only the interest for the time period that has passed.  At the end of your loan period, you can choose to repay your loan, or just pay the interest and receive a new ticket on another loan. Your collateral will be returned to you once you repay the principal, interest and fees associated with your loan.