Pawn Shop Loan Vs Moneylender Loan: Which is Better?

Pawn Shop Loan Vs Moneylender Loan: Which is Better?

People usually get loan products such as credit cards or personal loans from traditional money-lending institutions like banks and moneylenders

When in dire need of money or at the point of desperation, getting loans from a pawn shop is probably one of your best alternatives.

Pawn shops in Singapore have their own advantages that weigh more than their disadvantages. 

What is a Pawn Shop?

A pawn shop is a  money-lending platform that asks for items of value in exchange for cash.  It is a collateral-based type of loan. When you want your item back, you have to repay the loan amount including the accumulated interest rates. 

Pawn shops in Singapore are Singaporeans’ additional option when they want to avail very efficient cash-lending services other than bank and moneylender.


● Almost everything that has value may be hacked. 

Some of the common items pledged include jewelry, precious metals like gold and diamonds, branded items like bags and watches, rare collectibles like coins, among others. 

● Only 60% to 80% of the market price of the pledge will be lent to you. 

Every pawn shop has its own expert valuer to determine such. Unlike lenders that assess your loan amount based on your paying capacity or income, pawn shops assess yours based on the value of your pledge.

● Most pawn shops give 6 months for you to repay your loan and consequently redeem your pledge. 

Try your best repaying the loan or else, after such a period of time, the pawnshop will sell your item at an auction.

You will be given an extended period of 6 months should you make re repayment. Remember, however, that the interest rate payable for each month grows. So when your loan remains unpaid for months or a year, it would be highly recommended to just be surrendering your pledge as you would be better off that way.

● Interest rate for the first month is 1% but it increased to 1.5% during the second and subsequent months.

Pros and Cons of Pawn Shop


1. Credit score is not required. 

Details of your standing as a creditor would not matter as much as they would when you borrow from a bank. All you need is to have belongings of value that can classify as collateral or pledge.

Compared to traditional loans like credit cards from a bank, loans from pawning will not affect your credit rating at all even when you are in default. It is as if you did not get the loans at all. Example, when you default on your credit card loans, that information will forever be in your credit record.

2. Fast disbursement of cash. 

Loans from pawn shops are released faster compared to those secured from a bank. It would take days, even weeks, before the latter can transfer you the amount.

3. Customers incur cheaper interest for the first few months. 

Credit cards charge approximately 2% per month while loans from moneylenders are charged about 4%. Pawn shops in Singapore, on the other hand, only charge 1% and 1.5% for the first and second months, respectively. The cost of your loans will be cheap should you pay the pawnbroker only after a few months.

4. Any surplus generated from the auction will be returned to customers. 

Example, in case you pledge your watch for $10,000 and because of failure to repay the pawn broker, the watch was auctioned for $12,000, the excess S2,000 will go back to you less fees and interest. Singapore’s Pawnbrokers’ Act mandates pawnbrokers to share with you some, if not all, of the profits.


1. The amount you may need to pay may double or triple.

This, should you fail to reclaim the item after a few months.

2. May lose your item. 

The increasing interest rate per month collected by pawnbrokers makes it more difficult, if not impossible, for you to repay the loan. And as a consequence, Singaporeans may lose their item forever.

3. Loan option is limited. 

Any bank in Singapore offers more than one type of loan. Individuals who need funds to finance their education may apply for student loans, those that need home renovation may apply for renovation loans, those who need credit card may apply for one, and other loans like debt consolidation plans, among others. A pawnbroker can only offer you so much. The money depends on the value of your item. 

Pawn Shop Vs Money Lender

 Pawn ShopMoney Lender
Loan AmountDepends on the value of your item. You will get 60% to 80% of the market value of pledge.Up to 6 times your monthly salary
Interest Rate1% for the first month; 1.5% in subsequent months.Interest rate capped at 4% per month.
RepaymentNo fixed repayment. You can pay as much as you want for every partial payment.Flexible, up to 12 months subject to the terms and conditions of the agreement
Application ProcessFast approval, as soon as the item has been assessed. Fast approval, within an hour 

Should You Take Loans From a Pawn Shop?

1. When uncertain about repayment, pawn shops are a better alternative.

Borrowing from moneylenders entails repaying the loan money. Moreover, you are required to pay the cost of the loan money which is the interest rate. The fixed repayment schedule assists you in making repayments regularly.

On the other hand, when you are one of those who are in dire need of a loan but are not sure if you would be able to meet repayment terms, you may consider borrowing from pawn shops. That is the exact problem that pawnshop loans try to solve. You would not have to worry about repayment because your pledge will cover it up for you.

When you pledge one of your valuables like your Rolex watch for a loan amount that is significantly lower than the value of the watch but is enough to finance an urgent and expensive medical treatment, the ultimate cost you will incur is the watch itself should you fail to repay the debt. 

The good thing about that is that you become debt-free. No one will come after you, demanding repayment, because you have literally paid your loan the moment you have handed down your pledge.

2. Pawn shop interest rates are higher than personal loans. 

Do not be fooled by good news you hear about pawn shops. While they give remarkable lending services, they are not a ticket to pawning some of your precious family heirlooms like jewelry and pocket watches that have outlived many of your ancestors. 

You might lose more by doing so because the stories behind those heirlooms are more than the value of the loan amount you got in exchange.

Personal loans extended by banks come with 1% interest rate while those that come from pawn shops could reach 1.5%.

When you are in need of a personal loan but your credit rating is below what’s acceptable for moneylenders, then your best alternative would be pawn shops. 

Aside from the fact that details of your credit standing will be immaterial, the interest rate is far below than that charged by money lenders. Pawn shops charge only about 1.5% while a money lender can charge you about 4%.

The best strategy would be to resort to a pawn shop in Singapore only when your credit rating is bad and you are uncertain about making repayments in the future.

3. Pawn shops are more accepting than banks or moneylenders. 

There’s no way of getting money loans from any bank institution in Singapore other than by complying with all requirements asked. A pawnbroker would not even require individuals to have a part-time job. To get the cash, all they have to do is to give an item of value.

4. Pawn shop is also the place to buy gold. 

While it is best to sell gold from a goldsmith, it is best to buy one from a pawn shop. Take note, however, that the pawn shop might be most probably selling you second-hand gold.

Matter to consider

Avoid pawn shops to liquidate assets. Using pawn shops in order to liquidate assets is not the best idea. You are getting less than their actual market price. When you have gold, sell it to a goldsmith instead.


There are several tools available for you to determine the best option in terms of borrowing money. One of these tools is the Moneylender Review

This website consolidates reliable customer reviews and information about the products and services of various money lending firms in Singapore. It’s primarily a loan comparison site that allows you to receive up to 3 loan quotes from top moneylenders in Singapore.

Moneylender Review provides you with a lot of information that is a prerequisite to make the best decision about loans and other financial products in Singapore.