Pawn loans are inexpensive cash loans that are given to you in exchange for an item held as collateral. The amount of money you receive depends on how much your item is worth as well as on the specific pawn shop you go to. You agree on a set time to pay your loan back by, and when you finish paying off your loan, your item is returned to you. Payday loans, on the other hand, are loans made to you against your next paycheck. Their interest rates tend to be high, and you usually have a short period of time to pay the loan back by.
No Impact on Your Credit
Pawn loans don’t impact your credit score. You are not required to provide any credit information to get a loan from a pawn shop. If you default on the loan, the shop keeps the item you gave them as collateral. When you get a payday loan, you give the lender a postdated check that they will cash at the end of your loan period. If there’s not enough money in your bank account for the check to clear, you’ll not only incur an overdraft fee from your bank, your defaulted loan may be sold to a collector. When this happens, your defaulted loan is reported to all three major credit bureaus, and the defaulted loan may show up on your public credit report.
The payback period for pawn loans is generally longer and more flexible than on payday loans. The payback period is typically agreed upon by the lender and the borrower when the loan is made. The payback period may be extended if the borrower requests more time, depending on the amount of money borrowed and the borrower’s history with the pawn shop.
On the other hand, payday loans are made against the borrower’s next paycheck. A check is made out to the lender at the time the loan is given, and the check is cashed by the lender at the end of the loan term. An extension on the payback period may be granted, but a higher interest rate is usually incurred as a result.
Pawn loans have lower interest rates than payday loans. Additionally, if you extend or default on your payday loan, your interest rate will increase.
Pawn loans offer many advantages over payday loans. If you need quick cash, visit one of the 13 locations Monte de Piedad has in San Diego to discuss a loan. Your first pawn loan up to $250 with Monte de Piedad is free, and there is no interest or fees for six months.