Do pawn loans affect your credit score?


Do pawn loans affect your credit score?


The short answer is no!

A pawn loan will not improve your credit score, however, it also won’t negatively affect it. Pawn loans utilize collateral in exchange for a monetary loan. You can take your item/items to your local pawn shop where the pawnbroker will offer you an amount to pawn your item for. Once a dollar amount is set, they give you a ticket and you give them your item. Make sure to leave with a contract that establishes loan terms and interest rates. In Michigan we charge 3% per month + a $1 storage fee.

Pawn loans work differently than bank loans. Pawn loans do not check your credit history, nor do they impact your credit score. If you default on the bank, you are left owing them money. If you default on a pawn loan, they can keep your collateral and sell it to make back their money. In that way, they are not losing money.



What interest rate can I expect to pay on a pawn loan?

We’ve all been there. A bill is coming up, but the rent has eaten up your paycheck. It’s a loved one’s birthday, but money is tight. You need a loan, but banks check credit and take time. Pawn shops offer loans without the need of a credit check and you can leave with the money the same day. Pawn loans can cost more than a bank loan once fees and interest rate is calculated, but you get the money faster. Because pawn loans are based on collateral, if you don’t pay it off, debt collectors don’t come after you. You won’t impact your credit, but you do forfeit your item.

Interest rates vary from state to state. According to Michigan legislature, pawn loan interest rates in the state cannot exceed 3% per month . At Garden City Pawn, the interest rate is 3% per month & If you are a first time customer you can get a 0% interest rate for the first month!

Once you pawn your item, keep the ticket. You need it to retrieve your item. Pawn loans require you to be 18 years of age or older & you must present a government-issued ID, you will also be required to leave a thumb print and signature.  According to the National Pawnbrokers Association, an estimated amount of 80% of pawn loans are paid back.


As Always Garden City Pawn will make the Highest and Best Cash offer we possibly can on each and every item that comes into our store. Don’t Hesitate to call or Text us anytime if you have something to sell or Pawn!  -Tom

Call:  734-525-0777   |   Text: 313.215.6986

1 Comment

  1. Luke Smith says:

    It’s nice that you mentioned how pawn loans do not check your credit history, nor do they impact your credit score. I am a bit short on cash right now, so I am thinking of getting a loan in the meantime. I heard pawn shops accept firearm as collateral for loans, so I’d like to try that out.

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