An estimated 30 million Americans are reported to use pawn shops every year.
As much as Banks and microfinance institutions are coming up with competitive loan offers, turning to a pawn is always a safer move.
Unfortunately, you can’t get high loans of above $100,000 from pawn shops. However, many emergencies don’t cost that much anyway. So, for small amounts of quick cash, a pawn loan is advisable.
There are advantages that pawn shop loans have over other types of loans. Find out the benefits of taking out a pawn shop loan here.
1. Loans Are Instant
The most significant advantage of getting a pawn loan is the processing speed. Unlike bank loans, which can take up to weeks to be approved and processed, with pawn loans it’s a get in and get it situation.
With pawn loans, you must have collateral (item as security for the loan). You carry with you the item to the shop and exchange it a needed amount. The amount of loan given is a fraction of the value of your item.
Once you agree on the favorable amount, the owner will take your item and immediately give you the cash. They don’t need days to approve the item or run surveys and whatnot. This becomes very reliable when you need quick cash.
2. No Credit Checks
The other main reason why most people turn to pawn shops for loans is the no-credit-check policy. Whether your credit score is positive or negative, a pawnbroker won’t mind. They won’t even ask about it!
The collateral you take with you is enough security for the loan. This means your only requirement to qualify for a pawn loan is to possess a valuable item.
The valuable item doesn’t need to be worth millions. Pawn shops deal with small loans below $100k more often. So the golden vase in your bedroom or your diamond ring will work as a fine collateral.
3. No Impact on Your Credit Rating
Since pawn shops don’t deal with credit checks, their services don’t affect credit ratings. The worst thing about getting loans with banks and micro finances is that your late payments will reflect on your credit performance.
A bad credit rating will affect your ability to borrow money from lenders in the future. In case another emergency comes up, you’ll be stranded on how to get funding.
It’s advisable to use pawn shops for every low-amount funding requirement to stay clear of bad credit scores.
4. The Consequence Is Item Sale
If you fail to pay a bank loan, you won’t be able to get another loan from any financial institution. Yes, that’s how bad credit ratings are! This is why pawn shops are the go-to options.
If you fail to pay a pawn loan, then the lender will presume ownership of your collateral. From there, they can sell it to cover the amount they gave you as a loan.
This is both an advantage and a disadvantage. It’s an advantage because you won’t have to worry about your credit rating or bailiffs visiting your home. However, it’s a disadvantage if the item was valuable to your family because you’ll then lose it.
This brings us to the main tip when it comes to pawning items. Only pawn an item that you’d lose without feeling a pinch.
5. Get Multiple Loans
At a pawn shop, you can get as many loans as you want. Even different loans each day of the week. This is because it’s all based on collateral.
As long as you bring new collateral for each loan request, you can request as many times as you want. Other lenders aren’t this flexible. In most cases, they’ll expect you to pay off the first loan before you can apply for another.
This is unless your first loan was below your paying ability. Such lenders aren’t favorable in cases where several emergencies occur at once.
6. Multiple Loans Don’t Affect Your Lending Ability at the Bank
Pawn loans will never jeopardize your lending ability at the bank. No matter how many you take, your bank won’t be notified or lending ability affected in any way.
This means that you can pawn as many items as you want and head on the bank and apply for another loan successfully. Depending on different policies, you may not be able to borrow money from the bank then go and borrow a micro-financier.
7. No Tiresome Interrogations and Paperwork
One of the main issues with banks and micro-finance institutions is that they aren’t quick enough when giving loans. A loan request process will take ages due to the number of protocols one has to follow.
It starts with pre-approval, where you need to know if you qualify for the loan. Then the application processes which may take days for a call-back. Then interrogation and maybe surveys or investigation depending on the security.
By the time you receive the loan, the world already moved on! While a pawn shop also gives paperwork, you may have to sign only one contract that states your loan agreement. The contract will help them presume ownership of your item if you fail to pay the loan.
8. Items Are Securely Stored
Pawn shops store all collateral in a safe place. They make sure to maintain their value all through the loan term. This means that when you head to pick your item, you’ll find it as you left it.
Items in a pawn shop are not exchanged, improved, broken, or lost. In such cases, you can use your contract to get a refund or report the issue to authorities.
9. Interest Is Per Borrowed Period
Most pawns give charge interest monthly. This means that you can pay all the money back within the first month and get that month’s interest only.
The more you stay with the loan, the more interest it earns. The contract you sign may restrict the duration of loan payment. This is done so that they know when it’s time to sell your item.
Getting Pawn Shop Loans
Many advantages come with getting pawn shop loans. There are also many pawn shops in the U.S. that can serve your purpose. With that said, it’s advisable to survey and see which shop gives you a reasonable interest rate.
Do you have an emergency and would like a quick loan? Contact us today.