If you're short on cash and have a basement full of high-value stuff, a pawnshop loan may be an option.
When you bring something valuable to a pawn shop, there's a good chance you'll walk out with some cash. Let's take a closer look at pawnshop loans and the advantages they provide.
What Is a Pawnshop Loan?
A pawnshop loan is a secured loan, meaning it's guaranteed by something tangible. That's the pawn, or the object you bring in and leave with the pawnbroker in this situation. You'll get your pawn back if you pay off the loan on schedule. If you don't, the pawnbroker gets to keep the pawn and sell it as payment for the loan in their shop.
Pawnshop loans require no other qualifications than that you have anything of value. That is their strength; unlike other lenders, which examine your income and credit, you can stroll into a pawnshop and acquire a loan even if you have no income or credit.
How do pawn loans work?
A pawn loan, unlike a personal loan, can be a rapid option to borrow money because it does not require a credit check or an application. The value of the object you pawn determines the amount of your loan.
For example, if you own a car, you can take it to a pawn store and have it valued by a pawnbroker. The pawnbroker may give you a loan up to the appraised worth of the car once its value has been determined.
Pawnshop loans come with a variety of terms, including exorbitant interest rates. As a result, some states have enacted legislation to control the sector.
If you go ahead with a pawnshop loan, you'll be able to get the money immediately away. To reclaim your pawned property, you'll usually have to repay the whole amount of the pawn loan, though the amount of time you have to repay the loan varies by state.
The pawnbroker will inquire about your pawn in order to determine its worth and ensure that you genuinely possess it (thieves frequently use pawn shops to turn stolen items into cash). They'll then inquire as to whether you want to sell it or pawn it. They'll give you a loan based on the value of the item if you pawn it.
If you accept your loan, you'll get the money right away, and the pawnbroker will issue you a pawn ticket, which is a receipt for the items you've pawned. Make sure you don't lose it; you'll need it later to regain your item.
The pawnbroker will inform you of when you must return to repay the loan and reclaim your item. If you do not return by the deadline, the pawnbroker will simply keep your item and sell it in the shop. There are no penalties if you don't pay by the due date because your collateral is utilized to repay the loan.
When Is Taking Out a Pawnshop Loan a Good Idea?
Same-day funding is available from some personal loan providers. You may stroll into a pawnshop and acquire cash in minutes if you need money quickly.
It's nearly always best to seek a loan through more traditional channels if you need money. You'll save money, build credit, and be able to borrow a larger sum of money if you need it. But there are a few cases where a pawnshop loan can really help you, like when:
- You require cash right away. Some lenders provide same-day cash for personal loans. If you need money quickly, though, you may walk into a pawnshop and acquire cash in a matter of minutes.
- You only require a tiny sum of money. Pawn Shops typically accept only little objects and lend only a percentage of their worth. So you might only be able to get a few hundred dollars at most.
- You have a valuable thing that you're willing to risk losing. If you don't pay back the loan by the due date, you risk losing your thing forever. This is how some people lose valuable family heirlooms.
Source: forbes.com and creditkarma.com
