Should I Pawn my Car?

So, you are in a tight financial situation.

Or maybe, you have a car that you never drive. It could even be that you are tired of the old car, so you want to dispose of it.

If you are in any of those situations, pawn shops can help. As you probably already know, they are shops that collect items and pay for their cash value, while accounting for depreciation in pricing.

Here is everything you need to know about when getting a pawnshop loan with your car can be the right choice for you.

What are Pawnshop Car Loans?

There are chances that either you or someone close to you has pawned one item or the other before. When you pawn, you take a valuable thing to a pawnbroker who figures out its cash value for which you can correspondingly get a loan.

Pawnshops give loans for a variety of valuables, ranging from jewelry to collectible coins. However, in situations where the underlying value is a car, the loan is known as a pawnshop car loan.

Even though they can come at higher interest rates than most traditional loans, pawnshop loans generally are quicker and easier to get.

>When to Pawn Your Car

Poor Credit Score

Often, people decide to pawn their cars because of poor credit scores. A rough credit score can make it hard, if not impossible, to secure any of the traditional loans. Most lending institutions will want to be sure that you have the discipline to meet your debt obligations, and your credit score is an easy way for them to do that.

However, pawnshops, on the other hand, do not look at credit scores.

No Bank Account

If you do not have a bank account, seeking a pawnshop for a loan can be the best option for you to explore. That makes sense because the lack of a bank account will make it hard, if not impossible, for you to be making your monthly repayments.

In the case of a pawnshop car loan, all you have to do is to deposit your valuable (in this case, your car) with the pawnshop. And if you do not pay back, the worst that the pawnshop can do is to keep your vehicle.

Cons of Pawnshop Car Loans

Pawnshop loans are convenient. You do not have to go through any rigorous application process to get them. Instead, upon the presentation of the item to be pawned, you will be able to get your loan quickly and easily. However, they come with their cons.

High Costs and Poor Regulatory Status

Generally, pawnshop loans incur high costs. Their monthly interest rates can range from as low as 5% to as high as 25%! Then, there is poor regulatory status, too. This category of loans<has earned a notoriety for both their sketchy operations and charges. Many states are now beginning to institute more robust frameworks to monitor their activities.

As a result, before you consult a pawnshop for your car, be aware of the risks. Their annual costs of loans can be high. Your item can be sold if you are unable to pay back, and you might be burdened with hidden fees.

Getting a Pawnshop Car Loan

To get a pawnshop car loan, you should be aware of some requirements, which include:

18 or more

You have to be at least 18 years to pawn a car. Usually, pawnshops will demand a valid means of identification, either your driver’s license or your state identification card.

You Need to Own Your Car

To qualify, you must have equity in your car. A pawnshop car loan is a collateralized loan (your vehicle is the collateral!). Hence, it makes sense that your car must be wholly owned by you, with the title in your name.

This arrangement makes it easy for the pawnshop to keep the car if you cannot pay back your debt.

Is Your Car in a Good Condition?

While virtually any kind of car can be pawned, some pawnshops may require that your vehicle should be in good condition before your loan can be granted. Hence, you should check if your car has body damage and how good its engine is. Also, is it rusting yet?

You should expect the lender to go to the extent of directly inspecting your car or asking for some paperwork to ascertain if it is in good condition.


Moreover, many pawnshops often require to know the income of their borrowers before they give out loans. They do this to see if they earn well enough to pay back the loans that they will be taking on.

Though uncommon, therefore, pawnshops can decide to reject your request for a loan, if you are not employed, or you’re not earning enough.

Consider Alternatives

Because of the drawbacks of pawnshop car loans, it is recommended that you consider alternatives, two of which include:

Family and Friends

Loans from family and friends are often the cheapest. Indeed, if you want to avoid the high-interest charges of pawnshop car loans, this is the best route to take.

Side Hustle

Do you have a deadline for some payment, or you are in a tight financial situation? Consider a side gig to raise extra cash. In the end, you will make your own money, and you will not owe anyone.


Finally, by now, you should have identified the situations when pawning your car makes sense. Ideally, it would help if you were not in any of them. Also, because of the high-interest rates of pawnshop car loans, you might want to consider other types of getting money instead.

However, if you need to raise extra cash or you do not know how to go about getting a conventional loan because of your sub-par credit score, do not worry. The good news is: you can always get a pawnshop car loan instead!