Are you in the need of a decent-sized chunk of cash, fast? Have you exhausted your credit card limits and are unable to qualify for a personal loan from a bank?
If so, then we might just have the perfect financing option for your particular situation: a pawn loan.
Put simply, pawn loans have done wonders for many folks around the world in sticky financial situations. Read on to get the full scoop on pawn loans so that you can figure out whether or not pawning is a good proposition for you.
How Do Pawn Loans Work?
It's important to have a good fundamental understanding of how pawn loans work before you consider using them as a financing method.
The concept is relatively simple. You go to a pawn shop and ask for a loan. As surety for the loan, you bring a personal item as collateral. For instance, this could be a wedding ring.
The pawnshop owner will then keep that item for a set period of time, during which you are able to pay back the loan, often without interest. If you pay back the loan on time, then you will receive your item back. If you fail to pay back the loan on time, then the pawn shop owner gets to keep the item.
So you get the opportunity to get some quick cash and then pay back a loan without having to suffer much interest. The pawn shop owner gets the chance to keep an item after having paid significantly below market value in the event that you do not pay back the principal of the loan.
Pawn Loans Pros
There are several pros to pawn loans. Firstly, they often do not charge a significant amount of interest. Because the pawn shop owner does not generally make their money on the loan itself but rather on the event that you default on the loan, they don't need interest in order to sustain their business.
Secondly, you can always qualify for a pawn loan as long as you have the collateral to put up. The pawnshop isn't going to deny you the loan if you have a bad credit score or don't have a current income.
Pawn Loans Cons
The primary con of a pawn loan is that your loan amount is always less than the actual value of your collateral. For instance, if you do a title pawn loan on a car worth $10,000, you can expect to only receive $6,000 to $7,000 in the loan (or even less).
This means that you could let go of an item in a pawn shop title loan for significant less than its market value had you just sold it to a dealership — that is what you can expect.
Is a Pawn Loan Right for You?
Now that you know all about pawn loans, all that remains is for you to figure out whether or not a pawn loan is right for your particular financial situation. Make the right decision to be or not to be a pawn star.
