A short loan can still be an expensive one
A pawnbroker loan is usually repaid in one payment when you redeem your item, with interest quoted per month. A personal loan is repaid in equal monthly instalments, with a rate quoted as a yearly figure. A few pounds a month can look small, but the monthly rate adds up to a high yearly one, so comparing the monthly rates with a yearly personal loan rate is misleading.
The calculator puts both on the same footing. It works out each loan's total cost and its effective annual rate from the cash you receive and the payments you make, including any fee. Enter the pawn rate per month or per year as your pawnbroker quotes it.
The personal loan rate here is the yearly rate you enter, charged as one twelfth each month. A personal loan advertised as an APR also includes some fees, and lenders' representative examples can convert the rate in other ways, so use your own quote's monthly payment as a check.
Worked example
Borrow £500 for 6 months. A pawn loan at 5% a month, repaid in one payment, costs £150.00 in interest, so you pay back £650.00. A personal loan at 15% a year repaid in six equal instalments costs £22.10, a payment of £87.02 a month. The personal loan costs £127.90 less in total.
The effective annual rate of the pawn loan is 69.00% and of the personal loan 16.08%.
Repaying the pawn loan in equal instalments instead would cost £91.05 in interest. A pawn loan can still make sense when you have no income to show or a poor credit record, but compare the cost first.
To look at a single-payment pawn loan on its own, use the pawnbroker bullet loan calculator.
Things a number does not show
A pawn loan does not depend on your credit record, but you can lose the item if you do not redeem it. A pawn taken under the Consumer Credit Act 1974 is redeemable at any time within six months after it was taken (section 116(1)). A personal loan is unsecured but is affected by your credit record and income, and missed payments can harm your credit file.
Inputs for the pawnbroker loan vs personal loan calculator
Amount to borrow
The same amount for both loans, so the costs compare fairly.
Term
The months you take to repay, the same for both loans.
Pawn loan interest rate
The rate on your pawnbroker's quote. The rate shown is only an example.
Pawn loan rate is quoted
Choose per month or per year to match your quote. Pawnbrokers often quote monthly.
Pawn loan is repaid
All at the end, interest monthly with the loan at the end, or in equal monthly instalments.
Pawn loan fee
A fee as a percentage of the amount, taken from what you receive.
Personal loan interest rate (per year)
The yearly rate on your personal loan quote. The rate shown is only an example.
Personal loan fee
A fee as a percentage of the amount, taken from what you receive.
CALCULATOR QUESTIONS
Pawnbroker loan vs personal loan calculator questions
Is a pawn loan cheaper than a personal loan?
Usually not in the UK, because pawn rates are high and quoted monthly. Compare the effective annual rate of each.
Why compare the effective annual rate?
It matches the cash you receive to all the payments you make, so a monthly rate and a yearly rate can be compared fairly.
Does a pawn loan affect my credit record?
A pawn loan is secured on your item, so it does not depend on a credit check in the same way. Ask the pawnbroker what is reported.
How long do I have to redeem the item?
A pawn is redeemable at any time within six months after it was taken under the Consumer Credit Act 1974. Check your agreement.