Pawn shops generally charge monthly interest between 2% and 25%, with most states capping the rate somewhere in that range and a few allowing up to 30%. Because the number is monthly rather than annual, how much interest pawn shops charge looks modest on the ticket and steep once you convert it: a 10% monthly rate is a 120% APR, and 25% monthly works out to 300%. Separate fees for storage, processing, and insurance sit on top of that interest and can add meaningfully to what you owe.
Monthly Rates and What They Mean as an APR
A pawn loan is short-term by design. You hand over an item, the shop lends you a fraction of its resale value (usually 25% to 60%), and you have a set period — most run 30 to 60 days — to repay the principal plus interest and fees to get your property back. Interest is quoted per month because the loan is meant to be repaid in weeks.
To compare a pawn loan to other borrowing, convert the monthly figure to an annual percentage rate. A 5% monthly rate equals 60% APR. A 10% rate equals 120%. A 20% rate equals 240%. In states that allow the maximum 25% per month, the APR reaches 300%. For context, the average credit card APR was roughly 21% to 22% as of late 2025.1Board of Governors of the Federal Reserve System. Consumer Credit – G.19 The gap is large, but pawn loans are structured to be paid off before that annualized figure has a chance to compound over a full year.
Why the Rate Depends on Your State
There is no federal cap on pawn shop interest. Each state sets its own maximum, and the range across the country is wide. Some states hold monthly interest to 2% or less; others allow 25% or more. Many use tiered systems that permit a higher percentage on smaller loans and a lower one on amounts above a set threshold, such as $300.
State caps regulate interest specifically. Some states also fold all charges — interest, storage, processing — into a single maximum “pawn service charge,” while others regulate interest and fees on separate tracks. Because the rules differ so much from one state to the next, the reliable move is to look up your state’s pawnbroker statute or contact your state’s financial regulatory agency before you sign.
Fees That Get Added to Interest
Interest is rarely the whole cost. Most shops charge additional fees that can push your total well above the interest rate alone. Common ones include:
- Setup or processing fees, a flat charge for creating the loan paperwork. Some states prohibit them, others allow amounts that scale with the loan size.
- Storage fees, charged monthly to physically hold and secure your item. These may be a flat dollar amount or a percentage of the principal, and where states cap them separately, the ceiling often falls somewhere between a few dollars and $30 or more per month.
- Insurance fees, covering the shop’s risk of loss or damage while your item is in its possession. These are frequently bundled into a general service charge rather than itemized.
- Firearm background check fees, which apply when a gun is used as collateral. Redeeming the firearm counts as a transfer by a licensed dealer and requires a National Instant Criminal Background Check System check, typically costing $10 to $25.
Flat fees hit small loans hardest. A $5 processing fee and a $10 monthly storage fee tacked onto a $50 loan add 30% to your cost before interest even enters the calculation.
What Has to Be Disclosed on Your Pawn Ticket
The Truth in Lending Act requires pawn shops to give you specific cost information in writing before the loan closes. Your pawn contract must clearly state the finance charge (the total dollar cost of borrowing), the annual percentage rate, and the total of payments (the full amount you need to bring back to reclaim your property).2Office of the Law Revision Counsel. 15 USC 1638 – Transactions Other Than Under an Open End Credit Plan These disclosures have to be set apart from the rest of the contract so you can find them easily. The point of TILA is to make borrowing costs comparable across lenders, so the APR on your pawn ticket is meant to be directly comparable to one quoted by a credit card issuer or a personal lender.3Office of the Law Revision Counsel. 15 USC 1601 – Congressional Findings and Declaration of Purpose
State law sits on top of TILA, not underneath it. If your state requires additional disclosures, such as a written statement of your right to a grace period, the shop must provide those as well.
Before you leave the counter, check the ticket for:
- The principal, which is the cash you are actually receiving.
- Both the monthly interest rate and the APR. If only the monthly rate is shown, multiply by 12 for a rough comparison figure.
- Itemized fees, with storage, processing, and insurance on separate lines.
- The loan date and the maturity date (your repayment deadline).
- Grace period terms, if your state requires one, along with any charges that accrue during that window.
- The total of payments, which is the single number that tells you what it will cost to reclaim your item.
If any figure is unclear, ask before signing. Once you agree, the ticket controls the deal.
What Extending or Renewing Costs
If the maturity date arrives and you cannot pay in full, most shops offer two ways to keep your item:
- An extension pushes the due date forward, typically by another 30 days, once you pay the interest and fees already owed. The principal stays the same, so a new round of interest starts running.
- A renewal closes the old contract and issues a new one. You pay the accrued interest and fees, and a fresh ticket takes over with a new term.
Neither option reduces what you originally borrowed. Each cycle adds another month of interest and fees, so a loan you expected to cost $30 in charges over one month can easily reach $90 or more after two renewals. Some states limit how many times you can extend or renew.
What Happens If You Don’t Pay
Pawn loans are non-recourse. If you don’t repay or extend, the shop keeps your item and that ends the matter. It cannot send your account to collections, sue you for a shortfall, or come after you for any amount beyond the item you pledged.
Pawn shops also do not report to credit bureaus. A default won’t appear on your credit report or affect your score, and paying on time won’t build credit either. The only real consequence of walking away is losing whatever you pawned. After forfeiture, the shop can sell the item, and if it sells for more than you owed, in most states the shop keeps the difference. That margin is one reason loan offers sit well below resale value.
The 36% Cap for Military Borrowers
Active-duty service members and their dependents get stronger protection under the Military Lending Act. For covered borrowers, federal law caps the “military annual percentage rate” at 36%, and that ceiling includes most fees, insurance premiums, and add-on charges alongside interest.4Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations A pawn shop in a state that permits 25% monthly interest could charge a covered borrower an effective rate of only about 3% per month.
Coverage extends to active-duty members of all military branches (including the Coast Guard and Space Force), reservists on active duty, National Guard members mobilized under federal orders for more than 30 consecutive days, and their spouses and certain dependents.5Consumer Financial Protection Bureau. Military Lending Act (MLA) Lenders must give both written and oral disclosures of the military APR before closing the loan, and they cannot require mandatory arbitration or charge prepayment penalties.
How the Cost Compares to Other Short-Term Options
By APR, pawn loans are among the more expensive ways to borrow, though not always the most expensive. Credit cards averaged about 21% APR in late 2025, well below the 36% to 300%+ range typical of pawn loans, but they require a credit check and an existing account.1Board of Governors of the Federal Reserve System. Consumer Credit – G.19 Payday loans commonly carry APRs of 400% or higher and require proof of income, and defaults there can trigger collections and credit damage. Personal loans from banks and online lenders run from about 6% to 36% APR but depend on your credit score and income verification. A single $35 bank overdraft fee on a $100 shortfall repaid within two weeks calculates to an APR above 900%.
What a pawn loan trades for its higher rate is access. There is no credit check, no income verification, and no hit to your credit if you cannot repay. You lose the item, and nothing else follows. Whether that trade is worth it depends on how much the ticket says you’ll pay to get your property back, which is why reading it in full before signing is the one step worth taking every time.