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How Pawn Shop Loans Work & When You Should Get One

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We all need cash from time to time for unforeseen expenses, emergencies, or unplanned events. Getting a short-term loan from a pawn shop is one of the best and easiest ways to get cash in a hurry.

A pawn shop loan (also known as a collateral loan) is where a pawn shop accepts an item of value as collateral or security for a loan. If the client doesn’t repay the loan as agreed, the pawnshop may sell the item to recoup their money and costs.

Close up of hands giving and receiving money

Why Get a Collateral Loan From a Pawn Shop?

Many people believe getting a loan from a pawn shop is embarrassing. Others think pawn shops are just legalized loan sharks that rip you off. Nothing can be further away from the truth. These pawn shop myths have been debunked many times.

Pawn shops are one of the most highly regulated industries in America.

Maxferd has to comply with California’s legislative information – Chapter 2. Pawnbroker Regulations [sections 21200 – 21209]. The fees we’re allowed to charge a client for a collateral loan are set by the State of California.

Pros and Cons

Pros and Cons


The main advantages of getting a collateral loan from a reputable pawn shop such as Maxferd Jewelry & Loan include the following:

  • Quick & Easy – There’s no need to go through a long and complicated application process. You can have your pawn shop loan finalized within a matter of minutes and walk out with cash in your pocket.

  • No credit check – With banks or other financial institutions, it’s guaranteed they will check your credit score. There are no such requirements when you get a collateral loan from a pawn shop.

  • Won’t be reported if you can’t repay your loan – If you can’t repay your loan, you won’t be reported to credit bureaus. You’ll even be able to secure a new loan based on the value of the new item you’re offering as collateral.

  • Similar to financing yourself – Getting a collateral loan from a pawn shop is not that much different from self-financing. You’re using an asset you own to obtain cash, except you’re not selling the asset. If you can’t repay the loan, you’ll lose the item, but it won’t increase your debt burden.


  • Short-term lending horizon – Pawn shop loans are for people who require a short-term loan, such as for three or four months.

What Are Your Alternatives?

Alternatives to A Pawn Shop Loan
  • Max out your credit card – Using revolving debt such as a high-interest credit card is not an ideal way to get cash in a hurry. It can hurt your credit score as credit utilization is an important factor for credit bureaus.
  • Borrow money from friends or family – It’s a lot more embarrassing to borrow cash from friends or family than to approach a pawn shop for a loan. They may not be able or willing to help you and some things are better kept confidential. 
  • Sell something of value on eBay – Selling an item on eBay can work but there’s no guarantee you’ll be able to get a quick sale at a fair price. And once the item is sold, it’s gone. It’s highly unlikely you’ll get the opportunity to buy it back in the future.
  • Get a loan from your bank – Banks treat collateral loans (called installment debt) very differently from pawn shops. If you need to finance a new car, where the car is your collateral, approaching your bank is the right way to go. Asking them to lend you money based on the value of your grandmother’s engagement ring is another story! The best they can do is offer you a personal loan after checking your income and expenses, and credit score. Since you’re not putting up collateral, don’t expect to get a low-interest rate.

Getting a short-term collateral loan from a pawn shop is SMART!

How Maxferd Handles Pawn Shop Loans

Our qualified professionals have a lot of experience assisting customers with collateral loans. Our goal is to make the process as easy as possible. We follow a simple 5-step process:

  • Step #1 – Come in for a quick over the counter evaluation of your goods.
  • Step #2 – Receive your verbal over the counter quote in minutes.
  • Step #3 – Provide valid identification, i.e. driver’s license, ID card, or passport.
  • Step #4 – Your loan is written, and your contract is printed for you to sign and keep.
  • Step #5 – Your item is safely secured as you receive your payment in cash, by wire or check.

Items We Can Accept as Collateral

We accept a large range of items as security for a loan, namely:

  • Jewelry (even broken jewelry)
  • Fine watches
  • Precious metals and coins
  • Loose diamonds and precious gemstones
  • High-end DSLR cameras and equipment
  • Apple products
  • Laptops and computers
  • Musical instruments
  • Certain collectables
  • Luxury handbags
  • Art

How We Determine Value

Maxferd determines the value of an item based on what it can be sold for. As discussed in our article on how pawn shops determine value, market value or OMV (Open Market Valuation) is the price at which an item would sell for in a competitive auction. It’s the price that a willing buyer is prepared to pay a willing seller.

How Much You Can Borrow

Based on our evaluation of the collateral you’re offering, you can borrow between $1 and $100,000 from us.

No Monthly Payments

You only pay us what’s due when it’s time for you to settle the loan.

Length of the Loan

You have four months and ten days to pay your loan and reclaim the item you offered as collateral. For most jewelry items, this term is doubled.


Getting a short-term pawn shop loan is one of the best and easiest ways to get cash in a hurry.

Pawn shops can accept items as collateral or security for a loan that financial institutions such as banks aren’t able to accept. And since pawn shops are one of the most highly regulated industries in the United States, pawn shop loans have to comply with all relevant legislation.

If you have any unanswered questions on how pawn loans work, don’t hesitate to contact us. 

Call us at (800) 888-7296 or visit one of our five locations in San Francisco and Los Angeles to find out how we can assist you.

If you are interested in learning more about pawn shops and how they work, you can also check out our blog How Pawn Shops Work: A Beginner’s Guide.