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Selling vs. Pawning: The Benefits and Drawbacks

Published: 25 Jan 2018

Life does tend to throw us the odd curveball every now and again, and requiring some cash at short notice can happen to any of us for any number of reasons. This is where a pawn shop can come in handy. If you have never been to a pawn shop before then you may be unaware of exactly what services are on offer and which is best for you at this particular moment in time.

If you have some valuable items, then unlocking their value via selling or pawning can be very helpful in a pickle. How you take advantage of this is up to you – both options have their upsides and downsides, and often the best choice comes down to your personal feelings about what you’re selling, the value of the item, and the urgency in which you need the cash.

Below, you’ll find a full overview of both selling and pawning; allowing you to make an informed and favourable decision on how best to find the value in your belongings, whether you want to keep them or not.

What’s the difference between selling and pawning?

When you pawn an item, you essentially use it as security for a short-term loan. The pawnbroker will offer you a certain amount of money (based on the value of the item) under the agreement that you pay that money back within a certain timeframe. The pawnbroker will keep your item in a safe place for the duration of the loan. Once you have paid back all owed monies (plus interest) within the agreed timeframe you will get your item back. If you do not pay back the loan, the pawnbroker can sell the item to recoup any losses.

When selling a valuable item however, you forfeit your ownership of that item as soon as money changes hands. There are many different ways to sell all manner of valuable items, and some methods may bring you more money than others for selling the same thing.

Which method is best for you may not be as obvious as it first appears. Before you make your decision, check out the pros and cons below.

Pawning pros and cons

Pros

You still technically own your valuable item
When you pawn an item – providing you stick to the agreed repayment rules – you still own it at the end. This means that you still get to enjoy it and pass it onto the next generations of your family if you so desire. It also means that you can one day pawn it again should you need to, or sell it outright if that’s what you choose.

There is no risk to your credit score
A pawn loan is a type of secured loan, which means the risk is secured by the value of the item, not by your borrowing history. Your credit score is not affected in any way when taking out a pawn loan, even if you do not manage to pay back what you owe.

You can get your money on the same day
Pawning an item and receiving the cash can take as little as half an hour in certain stores, and you may not even need an appointment. Being able to raise money quickly can be really helpful during financial hiccups, and you can even get pawnbroker quotes online.

Cons

If you don’t/can’t pay the loan, you may not get your item back
The pawnbroker will sell your item if you do not pay the loan back as per the contract you signed. Of course, the full terms of the loan will be laid out to you before you sign on the dotted line. If you know you cannot pay the loan back, then selling your item may be a better choice.

You do not keep the item during the loan term
While the loan term is ongoing and you are yet to pay back the full amount, the pawnbroker will keep your item safely under lock and key. You’ll receive your item back at the end in exactly the same condition as when you left it.

Your item may not be accepted for a pawn loan
A pawnbroker may turn down certain items for a pawn loan, perhaps due to low value or poor demand in the area. If your valuable item is unusual or has been turned down elsewhere, a national pawnbroker with numerous stores may be happy to lend against it instead. This is because, should you default on the loan, they could transfer the item somewhere else in their network where it would sell.

Selling pros and cons

Pros

You may get more money if selling in the right place at the right time
You can potentially get more money by selling an item than by pawning it, but only if you are able to find the right market. For example, you may find you get more money via an online auction site than via an advert in the local paper, depending on what you’re selling.

You won’t have to pay the money back
Once your item has been sold and you have the money, you do not need to pay it back over a set period of time as you would with a pawn loan. You can use the money for whatever you want, and once it’s gone, it’s gone.

You get rid of items you no longer want
If you own a valuable item that you genuinely don’t want anymore, then selling is the obvious choice. You can declutter and earn some money at the same time, just be prepared to put some initial work in so that you get the best price.

Cons

Your valuable item no longer belongs to you
Of course, you may not really want to part with your valuables forever, particularly if they have been handed down to you. Selling an item is a very final transaction and so you must be sure that you’re ready to let your item(s) go forever.

Selling for the right price can take a long time
Selling via sites like Facebook Marketplace, Gumtree and eBay is convenient, but some items could take some time to sell, and you may not get the price you were hoping for. You may have to deal with a number of messages about your item for sale, and you’re likely to come up against a lot of timewasters.

You may have to deal with extra charges
Selling your item online can be a great way to reach a larger audience and therefore potentially receive a decent sum of money, but you are likely to incur seller’s fees as a result. Add to this the postage & packaging (and insurance on this, should the item require it) and you’ll find it can really eat into your profits.

However you choose to unlock the value of your belongings, always make sure you understand the ins and outs of any transaction. Thinking straight during a financial emergency can be tough, so always take time out to ensure you’re fully happy with whatever decision you ultimately make. If you have any questions about pawnbroking, you can speak to us here at H&T Pawnbrokers on 0800 838 973, or visit one of our nationwide stores for an informal chat.