So you need cash, quickly. Where do you turn? Increasing numbers of Americans are turning towards pawn shop loans as a means of accessing the funds they need, without delay.
Maybe you need the cash to manage your finances, or to fund a personal project, or to provide capital for an investment. Whatever the reason, your local pawnbrokers may be the best option for you.
To help you understand your options, we have created this handy guide. Here, we will fill you in on how pawn shop loans work, as well as illustrating the benefits which you could find yourself enjoying after visiting the pawnbrokers.
Read on to learn more and don’t forget to get in touch with our team if you have any questions about the points raised in this guide, or about our services in general. Your route to fast, easy cash begins here.
How Do Pawn Shop Loans Work?
A pawn shop loan works in a similar way to a standard loan. The borrower comes to the lender to request a loan of funds. The lender works out the risk involved and then draws up a contract for terms of the transaction. The funds are then transferred to the borrower and the borrower must adhere to the conditions laid out in the contract.
However, there are significant differences. Rather than agreeing to monthly repayments and proving that such repayments are within their capability, the borrower will simply offer up an item as collateral. The pawnbroker will then deliver the required cash to the borrower, which will be worked out as a percentage of the total value of the item.
This means that the borrower walks away from the pawnbrokers with two things. Firstly, they have the total cash value of the loan in hand. Secondly, they have a pawn ticket. This pawn ticket can be redeemed in return for the item when the loan is paid back. Alternatively, if you no longer want the item, you can simply leave the item with the pawnbrokers and keep the cash.
No credit checks or co-signatures are involved as the lender already has the collateral they need to secure the loan. However, there are some additional checks required. Pawnbrokers operate in a highly regulated industry, which provides peace of mind to the borrower but also necessitates the verification of the item being left as collateral. This might involve the provision of proof of purchase documents, as well as a short interview regarding the item’s history.
Why Are Pawn Shop Loans Such a Good Idea?
Now that we understand the mechanics of a pawn shop loan, it is time to consider why this method of receiving credit is such a good idea. This kind of loan is known to most of us already but many of us may not have truly recognized the advantages of working with a pawnbroker.
It’s time to find out what kind of benefits you can expect and to understand why you should consider a pawn shop loan whenever you need quick cash.
Fast Cash without the Hassle
No one wants to have to jump through hoops to secure a loan. No one wants to have to wait for an extended period of time to receive their money. Pawn shop loans provide the answer. Simply reach an agreement with the pawnbroker, hand over your item as collateral, sign up to the terms, and receive your money today.
This results in a streamlined cash flow which you can really rely upon. Whether you have bills to pay, you need to raise money for a personal project or investment, or you have another pressing issue which requires fast cash, pawn shops can take care of this for you.
There are other options open to you for fast cash, of course. These include payday lenders and title lenders. However, these lenders can be risky to deal with and could leave you out of pocket in the long term.
Risk is always a factor when it comes to borrowing money. What if you are not able to pay the money back? What if your circumstances change? These questions are a constant source of anxiety for many people looking for access to quick cash.
With a pawn shop loan, there is no such anxiety. Any risk is contained and limited to the value of the item which is put up for collateral. Whether you are looking to pawn jewelry or a watch, or perhaps some designer accessories which have been used, loved, and are still in good condition, the value of the loan is based solely upon this value.
This means, if you are not able to pay back the loan, or if you decide simply to hand over the item to the pawn shop and keep the money, the transaction is complete. There is no additional cost to worry about and there is no legal obligation to pay the loan back.
No Harassment from Debt Collectors
When borrowing from a traditional lender, there is a well-defined process in place if the borrower is unable to pay. First, polite requests are sent to the borrower, reminding them that money is due. Next, the debt is passed on to a collections agency who may use more aggressive methods of recouping money lent. While customers are afforded a degree of legal protection, dealing with debt collectors can be a troubling experience.
Agents may visit your property and take away valuable items that can be auctioned to pay for the loan, as well as bombarding you with legally mandated letters, calls, and visits. All considered, this can make life a misery for anyone who falls foul of debt collectors, even if their situation has arisen through no fault of their own.
For millions of Americans each year, pawn shops represent a refreshing alternative, with none of the hassle or worry associated with other forms of borrowing.
No Damage to Credit Score
Not being able to keep up with monthly payments can cause more hassle for borrowers than loss of property and harassment from collection agencies. It can, in fact, severely inhibit your life for many years to come.
Defaulting on loans and failing to adhere to payment schedules will damage your credit rating, making it difficult to get credit and loan facilities in the future. This means that a simple misunderstanding over a small personal loan can preclude you from getting the home of your dreams or the car you need, even several years or more after the event.
This is not the case with a pawn shop loan. As the collateral for the loan is provided up front, there is no risk of damage to your credit rating. This means you can sleep soundly knowing that, whatever happens, there are no negative long-term implications for today’s financial decisions.
All of a sudden, the path to financial solvency becomes much clearer. You are free to make the investments you want to make today without damaging your credit score. You are free to clear personal debts and to properly manage your finances without worrying about ruining your future. You are free to achieve the kind of cash flow you want, without the stresses and anxieties of searching out a more traditional loan. All of this comes from working with the right pawn shop loan provider.
Easier to Secure
Pawn shop loans are completely separate from credit ratings and scores. We have already looked at what that means for you going forward, but what about acquiring the loan in the first place? After all, most lenders will not work with candidates with a low credit score.
Bad credit is a self-defeating cycle. You need a cash injection to balance your finances, but you can’t achieve this cash injection because your credit history is poor. This only leads to further defaults and an ever-worsening credit record.
With a pawn shop loan, credit history is not taken into account. A contract is drawn up based upon the value of the item put up for collateral, and this is the only confirmation that the pawnbroker needs. All money lent is secured against this item and, once the ownership and legitimacy of the item are verified beyond a doubt, no further questions are asked in relation to credit.
This makes a pawn shop loan an excellent means of breaking the ugly cycle of bad credit. It reintroduces a bit of control, stability, and solvency into your life and into your finances.
Potentially Cheaper than Other Alternatives
In many cases, a pawn shop loan will not be significantly cheaper than securing a loan by other methods. However, once all factors are taken into account, the total savings can be great.
If your loan is passed on to a collection agency, this costs money and adds a lot of money onto the total repayable value of the loan. This is not a concern for pawn shop loan customers.
If you miss a payment on your traditional loan, you will incur a penalty fee, which can add up over time to a significant amount. Again, this is not a concern for anyone getting a loan from a pawn shop.
If you fall foul of the domino effect of bad credit, with missed payments stacking up on missed payments and creating an unmanageable situation, the potential costs can be enormous. Pawn shop loans are not connected to this system and so won’t contribute to this cost. In fact, the money you receive could put a stop to this chain reaction once and for all.
It is vital to look at the bigger picture when seeking credit. Opting for this kind of loan can save you serious money in the long run.
Why Do People Typically Turn to a Pawn Shop for a Loan?
There is no ‘typical case study’ for a pawn shop loan. In fact, the factors driving pawnbroker loan customers and the personal circumstances which lead them to a pawn shop in the first place are as diverse as the customers themselves.
We have outlined some of the common reasons that drive people to seek a pawn shop loan below.
- Paying off existing debts: Debts have a habit of getting out of control and can cause severe monetary problems for individuals and families. As there is no additional risk involved in a pawn shop loan, the quick cash received represents a safe method of paying off these debts and bringing your finances back under control.
- An emergency cash injection: Unfortunately, there are times in life when cash is needed and needed quickly. If rent is due, if you have had unexpected medical bills to pay, or if you suddenly need cash for another reason, there are few easier ways to quickly connect with this than via a pawnbroker.
- Funding a personal project: Life is all about creativity and ambition. If you have valuable objects lying around at home, you may decide to put these towards a good cause by using them as collateral at the pawnbrokers. This provides the cash you need to get your project moving.
- Funding an investment: Finding a great investment opportunity, and then discovering that you don’t have the spare cash necessary to fund this investment, is a frustrating experience. A pawn shop loan offers a quick solution, with potentially huge returns.
- Refurbishment work at home: Home refurbishment projects can be expensive, and a quick cash injection from a pawnbroker loan can provide a welcome boost to available funds.
- Paying for a well earned treat: We tend to accumulate items that we no longer need in the home and in our storage spaces. Just because we no longer need them, does not mean that others do not. By trading invaluable items for a cash loan, you could acquire the funds you need to pay for a treat for yourself or your family; a treat you will really appreciate and enjoy.
Want to know more about the potential of a pawn shop loan? Get in touch with our team today.