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Borrowing from a pawnbroker

Pawnbrokers can be used when you need to borrow money quickly. They often charge high interest rates compared to loans from other finance companies, such as banks.

To take a loan out from a pawnbroker, you have to leave something valuable as security. The item you leave is called a 'pawn'. Popular pawns include jewellery, mobile phones or games consoles.

You get your item back once you repay your loan plus the interest. The pawnbroker will sell your item on if you don’t repay your loan by the agreed deadline - usually six months. Money raised from selling your item will be used to repay your loan.

Documents you should expect from a pawnbroker

When you take out a loan from a pawnbroker, they will give you a ‘pawn receipt’ for the item you leave as security. It’s important you keep this receipt safe because it proves the item is yours. If you lose your receipt, the pawnbroker can legally refuse to give the item back to you.

The pawnbroker will ask you to sign a credit agreement before lending you money. Your credit agreement should state the interest rate you’ll be charged and when you have to repay your loan.

Check that the conditions in the agreement are fair and don’t favour the pawnbroker. An example of an unfair term is ‘the pawnbroker can change the payment deadline of the loan without warning’.

Unfair terms in credit agreements are illegal - find out more by following the link below.

• Unfair terms in contracts

Getting your item back from a pawnbroker

If you want your item back from a pawnbroker, you need to repay your loan and hand in your pawn receipt. You normally have six months in which to do this. Always check the deadline on your loan agreement.

Extending your loan deadline

If you can’t repay your loan by the deadline, the pawnbroker will try to sell your item to repay your loan.

If you don’t want your item to be sold, you can ask the pawnbroker to extend the deadline. This will give you more time to repay your loan so you can get your item back.

The pawnbroker may ask you to pay the interest on your loan before they agree to extend your loan deadline.

When the pawnbroker extends your loan deadline, they will give you another credit agreement called a 'modifying agreement'.

If a pawnbroker sells your item

When a pawnbroker sells your item, they will use the money they get from the sale to repay your loan.

If the sale of your item does not raise enough money to repay all your loan, you will have to repay the remaining debt. This means you will lose your item and still owe the pawnbroker money.

If the sale of your item raises more money than is needed to repay all your loan, you should be given any excess money. This means you will lose your item, but the pawnbroker will give you the money that's left over once they have repaid your loan.

The pawnbroker must provide evidence of the sale, eg a receipt, that shows the price the item was sold for. If the pawnbroker doesn't do this or won't give you the excess money, you could take them to court.

If you think the pawnbroker has sold your item for less than it is worth, you should research the value of your item. You can do this by speaking to other pawnbrokers and checking private seller adverts for similar items in the local paper.

If your item was sold for less than it's worth, complain to the pawnbroker in writing and include copies of any evidence, eg newspaper cuttings.

• Making a complaint - what to do first

If you need to complain

First complain to the pawnbroker in writing.

If a complaint you've made isn't progressing, you may want to think about taking the pawnbroker to court.

Decisions made through the Small Claims Track in court are legally binding, but the process is less formal than a full court case.

Going to court can be costly and there is always a risk that the settlement reached may not be what you want.

The Citizens Advice Bureau (CAB) provides information on starting a court claim, including things you should think about before taking someone to court.

• Making a complaint - what to do first

• Advice on making a small claim in court (CAB website) Opens new window

More useful links

• Debt - where to get free help and advice (money, tax and benefits section)

• Bailiffs and debt collectors (money, tax and benefits section)

• Dealing with loan sharks (money, tax and benefits section)