If you require quick cash but do not have the credit necessary to obtain an acceptable personal loan, you may be considering alternative lending options. These include loans from pawnshops, auto title lenders, and payday lenders. As opposed to a personal loan, a pawn loan doesn’t require a credit check, making it a simple option to borrow money. The worth of the object you pawn determines how much money you can borrow.
What is a pawnshop loan?
A secured loan, such as a pawnshop loan, is one that is supported by collateral. That object you bring in and leave with the pawnbroker in this instance is the pawn. A borrower can pawn a car title, for instance. You will then receive your pawn back if you repay the loan on time. However, if you don’t, the pawnbroker gets to keep the pawn and sell it to compensate the cost of the loan in their store.
Pawnshop loans have no extra eligibility criteria beyond having anything of value. The strength of this type of loan is that you can walk into a pawnshop with no income and no credit history and still get a loan, unlike other types of loans that depend on examining your credit score and income.
How do pawnshop loans work?
You will start by choosing a valuable item and bringing it into the pawnshop. Remember that it must be a thing that can be easily sold to a common person and has a high resale value. Even though you may have spent a lot of money on your antique collection, it’s unlikely that the pawnshop lender will be able to receive anything for it. Jewelry, musical instruments, guns and electronics are common pawn items.
The pawnbroker will inquire about your pawn in order to determine its worth and confirm that you genuinely possess it. Thieves frequently use pawnshops to change stolen items for cash. After that, he will ask whether you wish to sell or pawn it.
They will make you a loan depending on its value if you pawn it. Typically, you can expect a loan between 25% and 60% of its market worth.
Pawn loans, which can be quite expensive, charge an additional finance fee. The laws differ greatly from state to state, but if you do the math, you may be paying between 13 and 1,300 percent annual percentage rate. Comparatively, the typical online title loans on usnetloan.com have an APR of about 9.65 percent.
If you agree to take out the loan, you will receive the money right away, and the pawnbroker will give you a pawn ticket, which is a receipt for the item you pawned. You will need it later to return your item, so be sure you don’t lose it.
You come to pay back the loan and get your property back, usually within 30 or 60 days. The pawnbroker will just hold your item and put it for sale in the store if you don’t return by that deadline. Since your collateral is later used to pay back the loan for you, there is no penalty for paying after the due date.
What are the advantages of pawnshop loans?
- If your credit is bad and you can’t get a traditional loan, pawn shop loans may be the best option.
- Pawn loans can be a fast source of money for those without a bank account or a co-signer because no credit check is necessary.
- If you don’t pay back your loan, your credit scores won’t be affected and you won’t have to worry about debt collectors calling you. If you default on a pawnshop loan, the item you pawned will be kept by the pawn shop.
A pawnshop loan has its advantages and disadvantages, just like any other type of loan. A pawn loan, however, has more benefits than you can imagine as long as you know when and how to use it properly. Pawn loans are a reasonable option to think about if you own valuable stuff and need a quick fix to get through a bad time financially. But it would be great to understand about the top benefits provided by these loans before you make any decisions.