Is a Pawn Shop Loan a Good Idea?

Are you looking for a way to earn some quick cash?

If yes, then you’ve come to the right place!

Pawning your items for a collateral loan at a pawn shop is an ideal way of earning money urgently.

What are Pawn Loans?

A collateral loan pawn shop is the ultimate place to visit whenever you’re facing a financial crisis.

Because pawnbrokers can provide you with the much-needed cash in the form of a pawn loan, which is also known as a secured loan or a collateral loan.

Want to learn more about pawn shop loans and if they’re a good idea or not? Keep reading!

1.     How does it Work?

2.     The Pros of a Pawn Shop Loan

3.     The Cons of a Pawn Shop Loan

1.    How does it Work?

Unlike an unsecured personal loan, a pawn loan doesn’t require any credit check or even an application process.

Which is one of the major reasons why it is the most preferred way of earning money quickly, without much hassle.

Wondering how much loan can you get from a pawn shop?

The amount directly depends on the value of your item.

For instance, if you own a diamond necklace, you may take it to a pawnbroker and get a pawn loan for an amount up to the appraised value of the necklace.

Now, if you decide to proceed with the loan, the pawn shop owner would keep your valuable item as collateral or security and give you cash right away.

Afterward, you’d be required to pay back the full amount (including interest), before you can reclaim your necklace, watch, car, or whatever it is that you pledged as collateral.

2.    The Pros of a Pawn Shop Loan

A pawn shop loan could be your knight in the shining armor if you have a poor credit score and you don’t qualify for a traditional loan.

Also, if you don’t have a bank account and no one else to turn to for fast cash, a collateral loan pawn shop could be your ultimate savior.

Plus, you don’t need to have a good credit score in to qualify for a pawn loan.

And the best part is, your credit score won’t get affected even if you’re unable to repay the loan amount.

However, in such a case, you may lose ownership of the item that you pledged as collateral.

3.      The Cons of a Pawn Shop Loan

Apart from the risk of losing your favorite diamond necklace or your luxurious watch, a pawn loan has other disadvantages as well, including the high-interest rate.

Pawn shops offer collateral loans with interest rates between 5% and 25% per month, which could be too much if you’re borrowing a large amount of cash.

Nevertheless, at a pawn shop, you’d get the much-needed money within a few minutes. And that’s why pawn loans are a common choice among individuals who need cash urgently.

However, before you take a loan, make sure that the concerned pawn shop abides by the federal laws and the IRS code.

The pawnbroker must also comply with the Truth in Lending Act and the US Patriot Act.

All in all, visiting the best pawn shop during a financial pinch is the optimal choice for those with a poor credit score.