Pawn loan.
In plain English
A pawn loan is a small, short-term loan where you leave a physical item (jewelry, a tool, electronics) with a pawn shop as collateral. The shop lends you a fraction of the item's resale value and holds the item until you repay the loan plus fees and interest. If you don't repay by the deadline, you forfeit the item and the shop sells it, but you owe nothing more. Because the loan is fully secured by the item, the shop does not check your credit and the loan does not show up on your credit report.
01Why it matters
It is fast cash without a credit check or debt collector risk, but the fees are steep and you can permanently lose something worth far more than you borrowed.
02The math, step by step
You pawn a ring worth $400 and the shop lends you $100. To get the ring back within the term, you repay $100 plus fees that can work out to a high effective APR (the true yearly cost of borrowing). If you don't repay, you keep the $100 but the shop keeps the ring.
03What this is NOT
Selling is final and pays you more up front. A pawn loan lets you buy the item back, but only if you repay on time with fees. Unlike a title loan or payday loan, the worst case is losing the pledged item, not facing a collector or a lawsuit.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice