Should You Take a Pawnshop Loan?
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Do You Need to Take the loan from a Pawnshop?
Pawnshop loans are more affordable than title or payday loans for those who require quick cash. Still, consider alternatives first.
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Last updated on Jul 22 2021
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Table of Contents
Table of Contents
Payday lenders, title lenders, and pawnshops all offer their services to borrowers who have no other options for rapid cash. Of all three options, Pawnshop loans tend to be the most secure.
The interest rates for Pawnshop loans differ from state to state and typically are presented as fees, but it’s better to look at loans by annual percentage rates. While payday loans and car title loans can easily top 400 percent APR and the pawnshop loans are typically around 200% APR.
Pawnshop loans are a cost-effective way to borrow money, however, if you don’t have other alternatives and require cash immediately then a loan from a pawnshop loan is better than an or .
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How pawnshop loans work
To get an pawn loan it is necessary to visit the pawnshop using an item you own and are willing to leave as collateral. The staff evaluates the worth of the item, its condition, and potential for resale, then decides whether to offer a loan.
Nolo.com, a website which answers legal queries estimates that pawnshops can provide you with between 25% to 60% of resale value. It is advisable to shop through as well as compare prices from a variety of pawnshops since quotes can vary significantly.
If you take the loan and then walk away with cash as well as a pawn ticket which you’ll need to get your possession returned. You can take a photo of the ticket and send it to yourself as backup in case you lose the ticket.
Because you provided collateral to the lender, a pawn loan doesn’t require a credit check however, it is required that you are 18 or older and show proof of your identity. Pawnshops keep in constant contact with law enforcement agencies to prevent selling stolen items which is why the shop could need evidence of the possession or purchase of the object.
The types of items you can pawn differ depending on the location and store. Most popular items include jewelry, firearms, electronic, tools and musical instruments.
You then return within the time frame you agreed upon generally between 30 and two months later, to collect the item and repay the loan (plus the fees as well as interest). The charges vary depending on the state, and may include insurance as well as storage costs.
If you can’t repay in the initial time frame it is possible to extend or renew the loan. If you are unable to repay the loan and the pawnshop decides to sell your item to get its money back.
The typical Pawnshop loan is approximately $150, and can be repaid within 30 days, according to the National Pawnbrokers Association.
Nerdy Tip
A installment loan can be an affordable way to borrow money. These loans let you borrow the amount at one time and pay it back with fixed monthly installments over the course of months or years, rather than weeks. You won’t need to provide collateral as collateral. Moreover, loan amounts tend to be higher as interest rates are typically lower. Most lenders require a credit assessment to apply, but there are lenders who will accept applicants with poor credit.
The pros and pros of pawnshop loans
Pros
Pawnshop loans are a popular choice for consumers who can’t qualify for a conventional loan.
They could be cheaper that the penalties for being late when you pay with credit card or a reconnect fee for utilities.
They generally cost more than a conventional loan, but they have the cash quicker and do not require an approval for credit.
There’s no legal requirement to repay, so your credit score won’t suffer if you don’t repay the loan, nor will you be harassed by creditors or admonished. The only penalty in the event you don’t pay the loan is to lose the item.
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Cons
The biggest downside is the price. An APR of 36% is generally acknowledged by financial experts as the upper end of affordability for any loan. A Pawnshop loan of $100 that costs 15 dollars in charges and has to be paid within 30 days, is approximately 182% APR.
About 15% of pawn loans are not repaid according to National Pawnbrokers Association, and frequent customers are often the norm.
If you find yourself repeatedly borrowing or extending a loan pawn loan or pawning or redemption of the same item over and over You need more than this temporary financial patch.
If a pawnshop does not reveal an APR — many have only listed fees, or give interest per month rather than year. Use our calculator on the right to find the APR.
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Alternatives to paawning
Before visiting an pawnshop, you should consider other economical alternatives. Many of these alternatives can pay you within a couple of days.
Forbearance on bills: If you’re trying to extend your next paycheck, contact your utility or other creditor and see if they will prolong a grace time.
No-interest payroll advance Apps such as Chime and Chime offer an advance on your pay for up to 2 days. Choose an app that charges no charges or interest.
Help from community organizations: If require to pay for utilities, rent or other necessary expenses look into whether you could get a . The charitable, religious, or other community-based organizations have funds specifically devoted to helping those in the community in such situations.
Selling: If you’re willing to let go of the item you’re pawning think about selling it to a pawnshop , or a private buyer. A private buyer is likely to pay more than a pawnshop, but it might take longer. Either way the sale is likely to yield more than the pawn loan.
Small-dollar loans Mainstream banks love and offer short-term small-dollar loans to existing customers. These loans will likely cost less than a Pawn loan, but you’ll need to go through a credit screening. You may also be able to obtain a small-dollar loan via an online loan provider.
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Personal loan from a credit union or online lender: start around $500 and may offer low rates for applicants with poor credit however, you’ll need to become a member first. The personal loans from online lenders are more convenient, however they may come with greater interest rate.
Check if you are pre-qualified for an individual loan and not impacting your credit score
Just answer a few questions to receive customized rates from a variety of lenders.
The amount of the loan
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Stopping the cycle of debt
When this cash gap is resolved, plan ahead to coming time. One way to start is by saving for an . NerdWallet suggests a savings target of $500.
If you’re unsure of where to start, this is an excellent first step. If you require help provide basic financial and budgeting advice for no cost.
Authors’ Bios Bev O’Shea worked as a writer for credit at NerdWallet. Her work has been featured in publications such as the New York Times, Washington Post, MarketWatch and elsewhere.
Jackie Veling covers personal loans for NerdWallet.
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