Pawn money loans, is it a good idea?

Sometimes life’s problems catch people off guard.. What does this mean? Who suddenly need to pay for an illness, accident or home repair and don’t have enough money to do it in cash. At this time, many lose their minds. Ultimately, requesting a personal loan It is not as easy as it looks. To many it comes to mind to apply for loans of money for commitment.

If you are in a troubled financial situation and have some high-value items, you might consider visiting a pawn shop. When you bring something of value to these types of establishments, they may make you an offer that you may not be able to resist.

But before we talk about this any further, let’s pause for a quick look at this option because there’s a question we need to answer: Are pawn money loans a good idea?

Keep reading: Should I take out a loan with a co-signer?

How do pawn money loans work?

Pawn loans or pawn loans are sometimes rated much better than personal loans and the reason is simple. Unlike loans offered by traditional banks, loans from pawn shops have a much faster approval time. Why? Mainly because no credit check or application completion is required.

Another important difference that can be highlighted is that here the amount of the loan will be subject to the value of the item you will pawn and not the amount you need to pay your bills. For example, if you have a collectible guitar, like a Fender or Gibson, you can take it to the pawn shop so the lender can give you an idea of ​​its value. Once the approximate market price of the item is determined, this pawnshop appraiser will offer you a loan equal to or slightly less than the guitar’s appraisal.

Pawn money loans

About the terms and conditions

Now, you must be careful. Remember that heThe terms and conditions of this type of loan vary according to the pawnshop and on many occasions they include a high interest rate. It is for this reason that many states in the country have begun to regulate this industry.

Another point to keep in mind is that pawn shops will usually ask you for a single payment. Unlike traditional banking where you have access to an installment payment schedule, here you will have to make only one for the total amount of the loan. That money must be delivered to the store the same day you decide to claim the good that you have previously pawned. As for the payment term, this varies depending on the state in which you live.

About pawn shops

In the states of Florida and North Carolina, state laws dictate that pawnbrokers must sign contracts for a maximum of 30 days adding an additional grace period. To give you an idea, according to the National Pawnbrokers Association, the average loan size from pawnbrokers is $150.

More recently, and thanks to the benefits of the Internet, pawn shops have migrated to the virtual world. Sites like Borro claim to be able to lend up to $5 million, of course, provided the applicant turns in a highly valuable item or set of items. Then, in case you require cash instantly, you would always have the option of pawn a variety of valuable goods that are in high demand, from coins to collectible cars.

Advantages of pawn money loans

Loans offered at pawn shops can be seen as a attractive option if you do not have much credit score. Remember that those who do not have credit (or even having it, it is not as good as they would like) often have difficulties obtaining loans in traditional banks.

People who do not have a bank account or who do not have someone to turn to as guarantor or co-signerThey can also turn to pawn shops for quick cash since they won’t check your credit.

Another factor that could be taken as a benefit is that, if you don’t pay the loan, you won’t have to worry about your credit score going down nor of the annoying calls that collection departments usually make when debtors are late in paying their installments.

Note: Despite its advantages, keep in mind that the consequence of not paying a loan from a pawn shop is that you will lose the pawned asset.

Disadvantages of pawn money loans

The main drawback of taking out a loan at a pawn shop is the costs. Interest rates and borrowing fees at establishments like these are often sky-high. To give you an idea, it would suffice to say that the rates vary between 5% and 25% interest per month.

Another disadvantage of pawn loans is that if you don’t repay the loan on time, the pawnshop would have the right to sell your collectible. The worst of the case? You won’t even be entitled to a refund if your old priceless treasure has been sold for more than the price of the loan you took out.

Some pawn shops may also charge additional fees for other factors, such as small amounts to cover storage costs, property insurance, etc. They might even charge you to renew the loan or extend the payment term.

In addition, it is important that you know that there are little transparent pawn shops. So much so that legal action against pawnbrokers is not exactly an isolated case. That is why the “Consumer Financial Protection Bureau” has taken certain actions against a significant number of pawnbrokers, alleging that they were dishonest about the annual costs of their loans.

Alternatives to pawn money loans

Pawn shops may not be what you’re looking for. For that reason, we show you other alternatives where you could get the money you need quickly. Here are some of the options you can consider:

Online Peer-to-Peer Loans

In this case, you will not be going to banks or credit unions to obtain a loan, but to individual investors. You will have to fill out an application and your options will be limited depending on your credit score.

Additional works

If you want to earn a little extra money to cover an emergency payment or to pay for your daily expenses, a additional job it may be what you need. You can wait tables at a restaurant, tutor kids at a local library, or rent out the extra room in your house to make a little extra money at the end of the month.

payment extensions

If you think you’re in danger of defaulting on one or more bills, call your creditors, explain the situation to them, and try to request a payment extension. Thus, you will not be forced to pawn your most valuable objects.

Turn to a close person

If you don’t have a lot of money, ask a family member or close friend if they can lend you some. If you choose this option, you could avoid the high costs of paying interest and fees. Of course: make sure to request an amount that you can pay and be transparent with the method and date of payment. You don’t want to lose a friendship for money.

Applying for a payday loan may be one of those alternatives that comes to mind, but above all, remember that this type of loan is extremely dangerous, unless you are 100% sure that you will be able to make the payments on time. But the truth is that, even paying within the indicated period, payday loans have a high cost that you may not want to cover.

Depending on the state, companies can charge between $10 and $30 for every $100 they lend you, not counting the high commissions and fees if you don’t pay on time. In addition, the APR of a payday loan is in the triple figures.

Tip: If you opt for a payday loan, try to ask for a small amount of money. Thus, you will not have problems paying it as soon as you receive your next salary.

conclusion

Then, What are the points that you should be clear about?

  1. If you choose to apply for a loan at a pawnshop, you can get the money instantly, that is, at the same time and place.
  2. The amount of the loan will vary depending on the value of the object pawned.
  3. Interest rates are usually not the lowest in the market.
  4. You must return the money in one go; there are no quotas.

Ideally, no one wants to be in a bad financial situation that requires them to turn over their valuable assets to a pawnbroker. However, if you need money instantly and have no chance of waiting for a personal loan or finding a second job, it may not be such a disadvantageous option. Of course: pay close attention to the terms of the loan and evaluate the alternatives very well before closing the deal.

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