In South Africa and around the world, pawning cars has become a popular and accessible way to raise funds.

It’s good to know how car pawn loans work before shopping around for a car pawn deal.

Here’s a detailed guide covering all the relevant information, from what the car pawn process involves to specific types of offers to avoid and how car pawn loans compare to other loan types in South Africa.

What pawning a vehicle involves

Pawning a car involves handing the vehicle over to a reputable finance provider as security for a short-term loan.

The car is returned once the loan is repaid in full, and in accordance with the terms of the agreement.

Under the South African National Credit Act (NCA), pawnbrokers qualify as credit lenders. They must comply with relevant regulations, including legal limits on interest rates and charges.

Typical interest rate for repaying a car pawn loan

Accredited pawnbrokers offer competitive interest rates ranging from 36% to 60% APR.

These rates fall within the guidelines set under the NCA, and vary among finance providers.

Flexible loan terms

Pawning a car is essentially a type of asset-based loan, so funds are available over the short term.

Repayment terms are flexible, and range from three to 24 months. Depending on the pawnbroker, and provided the repayments are up-to-date, the term may be extended or the loan renewed.

Pawn-and-still-drive-it schemes: what to consider

Some “pawnbrokers” operate pawn-and-still-drive-it schemes, where funds are issued against the value of the car but you get to use it during the term of the loan.

In these types of transactions, the ownership of the vehicle is typically signed over to the lender in what is referred to as a “sale”. A “rental” fee is charged for the use of the car on top of the monthly repayments.

At the end of the loan term, you’re expected to “buy” the car back – often at the full resale purchase price. If you skip a repayment or can’t afford to pay the purchase price, the car is confiscated and sold.

Pawn-and-still-drive-it schemes have been red-flagged by the National Credit Regulator (NCR). They should be avoided.

The transactions are legally defined as credit agreements and not pawn deals. They don’t fall within the regulatory ambit of the NCR.

As such, there is no easy recourse if the vehicle is seized and sold – and you have to pay a lawyer to get your car back.

Pawn My Car does not offer this type of scheme.

We have been operating successfully across the country for many years. Our business model has to be transparent, legal and ethical in order to be sustainable.

What you need to pawn a car

At a legit pawn shop, only a fully paid-up vehicle, registered in your name, qualifies for a car pawn loan.

You must prove ownership of the car, supply the original car registration papers, a copy of your South African identify document, and proof of residence in the form of a recent bank statement or utility bill.

The vehicle’s full service history and up-to-date maintenance book are useful documents that may improve the appraised value of the car and the available loan amount.

How pawning a car affects your credit score

Borrowing money against a car has no impact whatsoever on your credit score.

Pawnbrokers do not carry out credit checks and they do not report clients to credit bureaus if they default on payments.

Pawning a car is a quick, discreet and easy way to raise funds – with or without the backing of a solid credit history.

When a car pawn agreement is (and isn’t) a good idea

If you don’t have the cash to cover unexpected expenses, or there is a lucrative business proposition you don’t want to miss, pawning a car is a viable source of funds.

The key is to only borrow money when you know you can pay it back within the agreed terms.

Risking an asset to pay for day-to-day consumables or an expensive holiday is not a good idea.

If the worst happens and you’re suddenly unemployed – and there is no other income stream to help you fulfil your obligations – the pawnbroker is fully within his or her rights to sell your car and use the proceeds to cover the losses.

What happens to your car during a pawn agreement

Pawnbrokers are experienced at storing expensive assets like cars. They have a vested interest in maintaining the condition and integrity of the assets.

Items are stored in facilities protected by restricted access, advanced security systems, armed response teams, exterior lighting and perimeter fencing.

Once your car is parked at the facility, no-one is permitted to drive it or have access to it. The vehicle is fully insured against theft and environmental damage. It’s returned to you in the same condition it was left in.

Pros and cons relative to other personal loan types

Pawning your car in South Africa: where we operate

Pawn My Car has branches in Cape Town, Gqeberha (Port Elizabeth), Durban and Sandton, Johannesburg. Our facilities are conveniently located, and operate during normal office hours.

Best car pawn rates

Besides offering competitive interest rates and same-day access to funds, Pawn My Car is an established pawnbroker with a trusted reputation.

How to apply for a car pawn loan

As a leading pawnbroker in South Africa, Pawn My Car operates an online platform and centralised call centre to facilitate easy applications and rapid response times.

All you do is complete the online application form, or call 0861 112 866, giving us basic information about your car – age, make, model, mileage and general condition.

One of our consultants will call you with a preliminary offer of a car pawn deal.

If you want to proceed with the deal, we set up a time for a physical vehicle assessment at a Pawn My Car branch.

A final offer is made based on the appraised resale value of the car, and a legally binding agreement is drawn up and signed.

The required documents and the car are handed over, and the funds are transferred into your bank account.

Complete an application now