Pawn Shop Loan

Pawn Shop Loan

A pawn shop loan is a short-term, secured loan offered by a pawn shop. In order to get one, you would need to offer up some sort of physical asset as collateral. The amount you get is usually a percentage of the value of the collateral, and If you’re unable to repay the loan, the pawn shop will keep the asset to cover its losses. 


 

What Is A Pawn Shop Loan?

To begin with, pawn shops are regular businesses run by pawnbrokers. These stores operate by offering secured loans to customers. Pawn loans are backed by the client’s collateral — which may be any item of value. Pawnbrokers are likely to accept gold, silver, collector’s items, jewelry, paintings and more as pledged assets. You can also sell the item to the store, but pawnbrokers are more prone to giving out a loan as it is more profitable for their business. Plus, when opting for a loan, you remain the owner of the item which is not the case when making a sale.

How Is a Pawn Loan Defined?

Pawn loans are loans secured by whatever you bring into the store. As an expert, the pawnbroker will appraise the item considering its condition, market demand, resale value and rarity. Then, the shop will make you an offer for a loan based on the item’s value. You must leave the asset serving as collateral with the pawnbroker during the loan term, and you’ll be given cash and a loan ticket. 

Just like every other loan, a pawn loan will accrue interest. A typical pawn loan will be issued at a term which the broker and the borrower agree upon, ranging anywhere from one to three months. This term could even be extended — certain shops might charge a fee for this whereas some will prolong the interval at no extra cost. And once you have repaid both the principal and the interest charges, you may come to the shop and pick up your collateral.

The pawn ticket plays a crucial role. When taking the loan, you’ll be issued with this piece of paper which lists out every transaction detail, including all the fees and the term. It is important not to lose your ticket as you must return it to the broker when visiting the shop to collect the pawned item.

Is A Pawn Loan the Right Choice for You?

Pawn loans promise immediate cash and average around $150. The process is fast and requires minimal documentation — usually nothing more than an identification document. Take an item of relative worth with you to a pawnshop to get an appraisal. If you think the offer is good — the loan is secured. Since the pawnbroker is backed by the pledged item, your credit score won’t be analyzed. The transaction can be completed within a few minutes, requires no stressful planning and is free of the burdensome paperwork required by mainstream financial institutions. 

In addition, thanks to the collateral, even if your credit score has lots of room for improvement, the broker won’t take this into account when granting the money. The only factor that will influence whether you are issued the loan is the value of your asset.

Pawn loans also have the built-in benefit of lower interest rates than most other loans offering near-instant cash for a short-term period, such as payday loans, which accrue sky-high interest. 

In addition, you’ll feel more comfortable having a longer period to repay your debt, especially compared to the repayment term of payday loans which are issued only until the next paycheck. In the case of defaulting on your pawn loan, your pawnbroker — being backed by the collateral — will not report it to the credit bureaus. This would never be possible with a loan issued by a bank, meaning that your credit score would feel the severe consequences. With the pawn loan, your credit score is not at risk if you default.  While you have a choice to either repay the debt or opt not to do so — leaving the item at the pawnshop, comes at a hefty price.

The cash you need at ninja speed.