Dealing with pawnbrokers

A pawnbroker is a lender who gives you a loan based on the value of something you own, such as:

• jewellery
• watches
• electrical goods
• musical instruments

It’s important to remember that pawnbroking is classed as high-cost credit, so it can be more expensive than borrowing from a bank.

So if you’re considering pawning an item and you’re not sure about the cost or risks, it could be worth speaking to a debt adviser for guidance.

They might be able to suggest safer alternatives that don’t leave you in debt, such as finding out what benefits you might be eligible for.

They can also help you create a household budget.

Valuing your item

The pawnbroker values your item and offers you a loan based on part of that value.

Agreeing the terms

You and the pawnbroker must agree on:

• the loan amount
• the interest rate and how it’s charged
• the length of the agreement (usually 6-7 months)

When you leave an item with a pawnbroker, it’s called a pledge.

We should stress that it’s worth knowing how much the item is worth beforehand.

If you know this, you’ll be able to decide for yourself if the pawnbroker is giving you a fair offer.

And always check the interest rate and APR before agreeing to a loan.

Repaying the loan

Your pledge will act as security for the loan - and you can get it back by repaying the loan plus any interest.

If you don’t repay, the pawnbroker can sell the pledge to recover the money.

Signing the agreement

Next, you’ll sign a credit agreement, which clearly sets out your rights and responsibilities.

You’ll also be given a pawn ticket to prove ownership - don’t lose it, as you’ll need it to collect your item.

Cooling-off period

If you change your mind, you usually have a 14-day cooling-off period (check your credit agreement to be sure).

You can cancel but must pay interest for however many days have passed.

If you’re unsure about anything in the agreement, ask the pawnbroker to explain before signing – it’s better to check now than run into problems later.

No, you’ll have to show photo ID, such as a passport or driving licence, along with proof of address. 

No, pawnbrokers won’t usually check your credit score, because the loan is secured against your item.

That’s why they’re sometimes used by people with poor credit histories.

If you can’t pay back what you owe, the pawnbroker can sell your item to cover the debt.

But the rules are different depending on how big the loan is.

Rules depending on the loan amount

If the loan is under £75 and isn’t repaid within six months, the item automatically becomes the pawnbroker’s property.

And if it’s over £100, the pawnbroker must tell you before selling the item and give you at least 14 days to repay and collect it.

Extra or shortfall payments

If your item sells for more than the loan and interest owed, you should get the extra money back.

But if it sells for less than you owed, most pawnbrokers won’t ask you to pay the shortfall.

Nevertheless, it’s worth checking the agreement carefully to be sure.

Extending your agreement

If you need more time to repay, you can sometimes extend the agreement by paying off the interest and re-pledging the item.

But remember that this will add to the overall cost.

If you think you might struggle to repay, speak to the pawnbroker as soon as possible to discuss what options are open to you.

They may be able to offer an extension or alternative arrangement.

If your loan was worth £75 or less, you could be asked to complete a standard form confirming the item is yours.

But if it’s worth more than this amount, you’ll have to swear an oath that the item belongs to you.

This can be done: 

• through a magistrate’s court (England and Wales)
• with a solicitor or commissioner for oaths (a small fee usually applies)
• in Scotland, through a justice of the peace

Once complete, you can either collect your item or start a new agreement.

All pawnbrokers must be authorised by the Financial Conduct Authority (FCA).

They must give you clear documents, including: 

• a credit agreement with full terms
• a Pre-contract Credit Information form

And if they’re part of the National Pawnbrokers’ Association (NPA), they’ll be required to follow a professional code of conduct.

If the pawnbroker you’ve dealt with is part of a chain, get in touch with another branch to find out what will happen with your pledge.

You can also check the NPA website for advice on how to contact the business and get your item back.

If you’re not satisfied with the service you’ve received, complain to the pawnbroker in writing.

And if you’re unhappy with their response, you can then take your grievance to the Financial Ombudsman Service (0800 023 4567).

As a last resort, you could take your case to the Small Claims Court.

But be aware that there are fees involved and you might not get the outcome you want, so you’ll have to weigh up this decision carefully.