Pawn Shop Interest Rates Explained

Brian McCracken


Sometimes we all hit a rough spot financially and need a little help through a rough period of time. It’s completely normal and happens to a lot of people.
One of the options you have is to make a pawn load on some valuable items you may own that are in good condition and complete.
One of the things that people new to pawning will often wonder is about the interest. How much does it cost – is it too much, or is it really affordable?
These are great questions and I can’t blame you for wanting to know a little more about them upfront.
So if you are curious about how pawn shop interest rates are calculated then let’s talk.
Well there’s some good and bad news…
The good news is that in most states the interest rates are regulated to fairly low levels (between 1-5% per month). The bad news is that in some states, they are regulated a much higher levels (25%+) or not at all.
How To Find Pawn Shop Interest Rates In Your Area
Because some states regulate interest rates at high levels, it’s not uncommon for pawn shops to complete with each other by voluntarily reducing the amount of interest they charge their customers.
The reason they do that is just to fight for the same customer as the shop down the street. If they pay the same amount but charge a lower interest rate it will be cheaper for the customer to get their merchandise back. So in that way they can offer a ‘better deal’ for the end consumer by lowering the interest rate they charge them to pay back the loan in full.
Pawn Shop Interest Rates are normally very affordable. They are set by state law in most cases but in some situations a pawn broker may reduce his interest rate to out price the competition.
But how do you know if that’s going on?
How do you find out who is the cheapest in your area?
This is pretty simple. It involves using the age-old technique of actually calling the pawn shops in your phone book (or listed online) and asking them what they charge.
After you call 2 or 3 different shops you will get a good idea if this kind of ‘interest rate price fight’ is going on in your area and where you can get the best deal for repaying your loan.
Unfortunately, there is no centralized ‘registry’ of pawn shop interest rates, so you do really have to do this if you want to save yourself some money. I will at a future point in time try to collect all of the regulated interest rates for you and create a reference so that you can lookup the interest rate by the state you live in – but you will still want to call around to try to find the best deal.
When you look at the big picture, I would say the average rate is around 5% per month. That’s actually very affordable over all.
Ohio’s interest rate is 5% per month. So if you took out a $100 loan on your item, it would cost you $5 in interest for that first 30 days.
There is a catch in all of this though. Some states allow pawn shops to charge ‘storage’ or ‘filing’ fees.That’s something you will want to be aware of and look out for when calling around. Be sure you ask about ‘any other fees’ that may apply.
Pawn Shop Interest Rates are normally calculated on a monthly basis. They are often set by local or state laws and are closely regulated.
In Ohio for instance it costs your $4 per month in storage just to store your loan. Mind you, it’s not $4 per item, but for the entire loan.
So if you made that same $100 loan from above it would cost you $5 in interest and an additional $4 in storage – or $9 total – on top of the $100 that you were loaned to begin with to get your item out of pawn.
That’s still only $9 to barrow $100 for 30 days though, which is very affordable compared to other short term lending options.
How About One More Example?
Let’s still assume that you were making the loan in Ohio and the interest rate was 5% + the $4 in storage every 30 days.
If you were to barrow $300 it would be $15 a month in interest +$4 a month in storage. That means it would cost you $319 to get your merchandise back in the first 30 days after you’ve made the loan.
So for $19 you can barrow $300 when you are in a jam. That’s not too bad…
The Nerd’s Experience
When someone makes their first loan, one of their first questions is ‘How much will this cost me?’
This might come as a little bit of a surprise, but at least 2 or 3 times a week I work with a customer who is surprised at how cheap making a pawn loan really is.
You see, when it comes to short term loans the interest rates a fees people typically pay are enormous. That especially true for a lot of the ‘check cashing’ businesses out there that work hand-in-hand with payday loan operations.
It’s About That Time…
Well it looks like it’s about the right time to close up this post and move on to the next.
Hopefully you have a better idea of how to find out what the pawn shop interest rates are in your area and how to shop for the lowest rates possible.
If you have any questions or comments, feel free to leave them in the comment form below and I’ll be happy to get back in touch with you as soon as possible.
Take it easy,
The Head Nerd