Some personal loan lenders offer same-day funding. But there are a few cases where a pawnshop loan can really help you, like when: That way you’ll save money, build credit and potentially access a larger amount of money if you need it. If you need money, it’s almost always better to apply for a loan through more traditional sources. There’s no penalty for not paying by the due date, since your collateral is then used to repay the loan for you. If you don’t return by that date, the pawnbroker will simply keep your item and put it up for sale in the shop. The pawnbroker will tell you when you’ll need to return to repay the loan and reclaim your item, usually within 30 or 60 days. Make sure you don’t lose it because you’ll need it to reclaim your item later.
With all things considered, if you accept your loan, you’ll get the cash immediately, and the pawnbroker will give you a pawn ticket, a receipt for what you’ve pawned. This means you’ll owe a total of $312.50 on a $250 loan. Not only will you owe $250 in principal, but you’ll also owe $62.50 in financing fees. The pawnbroker offers you a loan that’s 25% of its resale value ($250) with a financing fee of 25%. Let’s say, for example, your pawn has a resale value of $1,000. In comparison, the average personal loan charges a rate of around 9.65% APR. The regulations vary widely by state, but when you do the math, you could be paying the equivalent of anywhere from 13% to 1,300% APR. Additionally, pawn loans charge a finance fee instead of an annual percentage rate (APR), and they can be very expensive. You can typically expect a loan of 25% to 60% of its resale value (Important: the resale value is usually much lower than what you paid for the item when it was new!).
If you pawn it, they’ll offer you a loan based on its worth. Then, they’ll ask if you want to sell it or pawn it. The pawnbroker will ask questions about your pawn to assess its value and to make sure you actually own it (thieves frequently use pawn shops to turn stolen items into cash). Popular pawn items include jewelry, power tools, firearms, musical instruments and electronics. Your book collection might have cost you a lot, but it’s unlikely the pawnbroker will be able to get much for it, for example. Keep in mind that it needs to be something with a high resale value and that can be easily sold to the general public. How Do Pawnshop Loans Work?įirst, you’ll find an item of value and bring it into the pawnshop. After all, our ancestors didn’t have FICO scores or pay stubs to prove their creditworthiness to lenders, and so they used a collateral-based system like this. In fact, pawnshop loans are one of the oldest forms of lending for this reason. That’s their strength unlike other loans, which rely on checking your income and your credit, you could walk into a pawnshop with no income and no credit and still get a loan. But if you don’t, the pawnbroker gets to keep the pawn and put it up for sale in their shop as payment for the loan.Īs long as you have something of value, pawnshop loans have no other qualification requirements. If you pay off the loan in time, you’ll get your pawn back. In this case, that’s the pawn-the item you bring in and leave with the pawnbroker. What Is a Pawnshop Loan?Ī pawnshop loan is a type of secured loan, which means it’s backed by collateral. They’re not a fail-safe, though, and they have their limits. But if you had to choose one, pawnshop loans are the least damaging financially because they can’t affect your credit. None of these products are particularly great, and it’s best to use them as a last resort. These are things like payday loans, auto title loans and pawnshop loans. If you need cash fast and you don’t have the credit needed to get a good personal loan, you might be thinking about alternative lending products.