Are you thinking about making a cash loan through a pawn shop and aren’t sure how they work?
No problem, let’s talk about it and by the time we are done, I’m sure that you will have a much more clear understanding of how they work.
First of all, let’s talk about the basic principle behind pawn shop loans.
Basically, you are going to find something of value that a pawn shop accepts and take it into their store.
They will look over your items and determine what they think that they might be able to loan you against them.
If you accept their offer, you will be paid in cash on the spot for the items with the understanding that you will come back and get them at a later date.
There will be interest on the principle of the loan (or the amount you borrowed) that is typically between 2 and 25 percent per month depending on the state and local laws in your area.
In addition, the may be some additional fees but they normally are not onerous as cash loans through pawn shops are one of the most affordable forms of short term financing available today.
When you are ready to repay the principle of the loan as well as any back-due interest charges, you will head back into the pawn shop, pay your loan off and get your items back in the exact same condition that you left them in.
There’s really nothing to getting and using loans through pawn shops and if you do it right, you can put yourself at a real advantage by taking advantage of them in all of the right ways.
How To Get The Most Money When You Make A Loan Through A Pawn Shop
With all of that having been said, you will probably be concerned about how to get the most money possible when you are going into a pawn shop to get a short term cash loan.
There are a few things you can do to maximize your chances of getting the best offer possible and they are all pretty simple.
First off all, you want to be sure that you take the right type of merchandise with you to begin with. That means something that a pawn shop accepts, is newer, in good condition and typically will sell for a good amount of money, even when used.
Once you’ve found some items that fit this description, you will want to clean them up and make them look as new as possible. This is pretty important because you want your items to look as new as possible.
The reason for this is that when a pawn shop looks at items, they are going to be looking at them as if they may have to turn around and sell them one day in the event that you never come back for them.
Now, of course we all know that you intend to come back and get them (probably), but it doesn’t always happen and that’s the sad truth of the matter when it comes to loans through pawn shops.
So making your items look their best will often put the pawn broker under the impression that they wouldn’t be too difficult to resell should they have to at one point in time. That will work in your favor when it comes time to negotiating a price for your items.
Additionally, and along the same line of thought, you want to make sure that you have all of the various parts and pieces with your items and that they are as complete as possible.
The last thing a pawn shop really wants to do is go around finding the missing parts to things when they have to resell something. So, if you have all of the original accessories that an item originally came with, that will also help your situation when talking about prices and the amount a pawn shop will be willing to loan you.
How Much Do Loans Through Pawn Shops Cost
Well, that’s a much more difficult question for me to answer in a national scale.
The reason for that is that pawn shops are regulated on the state and local level. Because of that, not all pawn shops across the country charge the exact same amount for their loans.
Additionally, certain states either allow or require pawn shops to charge other additional fees associated with the loans such as a storage fee, origination or ticket fee, etc.
That having been said, I can tell you that in no case will a pawn shop charge you more than 25% interest on the loan because that’s the highest interest rate in the country that I am aware of.
Typically speaking though, the interest rates average something closer to 5-8% in most states.
In other words, if you make a $100 loan through a pawn shop, it will probably cost your between $5-$8 a month depending on where you live and as much as $25 if you live in a really high interest rate state.
Keep in mind though, in those high interest rate states, if there is a lot of competition in the area the pawn shop may be willing to cut you a better deal on the interest to make sure that you don’t go to one of their competitors.
Are Loans Through Pawn Shops Safe
The next major question that you might have is if loans through pawn shops are a safe thing to do.
Well, the pawn industry has been around for almost 2,000 years in one shape or form and with that history there has been a lot of lessons learned.
Today’s pawn broker isn’t what you might be thinking if you are basing your opinions on your what your grand parents say about pawn shops.
Pawn shops today work closely with law enforcement to help ensure that stolen merchandise stays out of their stores.
In addition, they are tightly controlled and regulated through their state and local agencies to ensure that they are following all of the laws in their area that governs their operations to ensure that the customer is treated fairly and within the framework of the legislation protecting those transactions.
Above and beyond these enforcement policies, pawn brokers are proud of their businesses and genuinely want to help the people in their communities. I can’t recall a single pawn broker that I’ve met that doesn’t have a huge interest in operating a completely ethical business and serve their customers in the best way possible.
Can Anyone Get A Loan Through A Pawn Shop
In pretty much every state that I am aware of a pawn loan requires that the customer signs a legal contract that states the terms and conditions of the loan.
Because of that, minors are not able to get a pawn loan as they legally aren’t able to enter into a contract without their parent’s or guardian’s consent.
With that in mind, as long as you have an ID, that’s all that most states require you to have to get loans through pawn shops. Of course, you have to have something that the pawn shop accepts but I felt that would go without saying.
Does Credit Matter To Get Loans Through Pawn Shops
No, when getting a loan through a pawn shop, they aren’t going to take your credit score into account what so ever.
Loans through pawn shops are known as secured loans, or no-recourse loans, so there’s no reason to look at your credit history. The entire loan is based on whatever items that you take into the pawn shop to begin with.
That’s why pawn loans are so popular in so many areas. Even if you’ve made some mistakes in the past with your credit, a pawn shop just won’t care about it and treat you just like you are anyone else. It’s just a part of the unique service that they offer the communities that they serve and provide anyone with the access to quick cash when they need it the most.
Are There Any Risks To Getting Loans Through Pawn Shops
There’s no real risk associated with getting a loan through a pawn shop.
As I talked about above, pawn loans are known as no-recourse loans. What that means is that even if you can’t make the payments or default on the loan, the pawn shop isn’t going to try to sue you or anything.
Just the same, they aren’t going to put a black mark on your credit history or send you to collections or anything along those lines.
The only risk really is that you will probably end up losing or forfeiting whatever items you made the loan on to begin with because that’s how the pawn shop will turn around and get their money back.
Are Loans Through Pawn Shops A Good Idea
Well, when push comes to shove and you need immediate access to money to help you get through a rough period or a time when you just can’t come up with a way to make ends meet, then yes, using a pawn shop to help you out is a fantastic idea.
Really, that’s exactly what they are there for to begin with.
Pawn shops exist purely to help individuals who are in a time of need get through that gap where they just don’t have enough money to make everything happen the way it should.
Now, with all of that in mind, if you don’t really need to money, it’s probably not a great idea to just make loans at a pawn shop for no reason. Really, they should be reserved for when you need the money the most.
The Bottom Line
Getting a loan through a pawn shop can really help you out of a bind when you need it the most.
if you use these loans like tools to help avoid some kind of disaster or keep your life moving in the direction you need it to, it’s almost impossible to replace the utility that this type of financing offers you.
Just as a piece of advice though – try to limit the number of loans you take out with the pawn shops in your area. There’s nothing worst than forfeiting something just because you couldn’t keep track of all of the various due dates that all of the different loans may have.
It’s almost always better to make one or two big loans as opposed to a dozen smaller loans. It’s much more manageable and will help give you a more stable platform to work off of when you are trying to keep all of your monthly finances in order.