What are loans from pawn shops? How do they work and are they safe to get? If you can’t pay them back, will they affect your credit score? These are all great questions that I see all the time and I will do my best to answer them for you below.
First of all, pawn shop loans are known as collateral loans, or secured loans. They re loans made against something of value that you bring with you to the pawn shop.
The pawn shop will look at the item(s) that you bring in and determine if they can make a loan against them and if so, how much they can loan you.
That having been said, if you can’t repay the loan, it won’t negatively affect your credit score. Once the item is forfeit, or turned over to the pawn broker, the loan is considered paid in full and there’s no reports that they will file or anything else that will happen to you should you not be in a position to repay them.
That having been said, loans from pawn shops are extremely affordable, especially when compared to the other potential financing options that are out there.
If you were to borrow $100 at a pawn shop in Ohio, it would cost you just $9. Compare that to a reconnection fee, negative credit filing, or worse.
How Much Are The Loans From Pawn Shops For
This is going to be largely based on the items that you bring to the pawn shop to begin with. The average pawn loan across the nation is approximately $150, but you can borrow as much as you need to as long as you have the collateral to support the loan.
When a pawn shop makes you a loan, it’s going to be for a portion of the retail value of the item you bring in. Remember that the pawn shop is not buying your item, they are just holding it for you until you pay the loan back.
Additionally there are other things that a pawn shop has to consider when they are making you a loan against an item, such as the cost of storage, future demand and resale potential should you end up forfeiting the loan.
Keeping all of this in mind, typically speaking you are going to get roughly 40-60% of the current going used value for your item as determined through sites like eBay and Amazon. If something in similar condition and completeness sold for $100 on eBay, you will probably get a loan for around $50-$60 on it from a pawn shop.
The same goes for items made out of precious metal, but as opposed to the pawn shop using a site like eBay or Amazon to determine the items value, they are going to use the current market spot price for that metal and take into consideration any diamonds that are at least 1/2 carat or larger typically.
Smaller diamonds (below 1/2 carat) won’t add significant value to your item as stones that size are typically not in demand and harder for a pawn shop to sell for any appreciable amount of money.
How Long Are The Loans From Pawn Shops Good For
This is a question that will have to be answered on a state by state basis.
You have to understand that pawn shops are tightly regulated on federal, state and local levels. If a given state’s laws specify that a pawn shop hold onto items for a certain length of time, but the city laws that the pawn shop is in states that they hold onto it for a longer period of time, then the pawn shop must comply with the city’s law, not the states as long as the city’s law is not in conflict with the state’s.
That having been said, most loans from pawn shops are at least 30 days with many being 2, 3, 4 months and longer before a pawn shop can forfeit your items and make them available for resale.
This should provide you with plenty of time to repay you loans and get your items back, just as you left them at the pawn shop.
Are The Loans From Pawn Shops Paid In Cash
Yes, when you get a loan from a pawn shop, they are going to give you cash on the spot.
After all, you are typically only going to be needing loans from pawn shops in emergency situations and what good would it be for you to have a check that you then have to wait to deposit and clear before you had access to the money you needed?
With that in mind, when you pay your loan from the pawn shop back, they are going to expect that you pay them back in cash as well most of the time. Some pawn shops may accept debit cards, but most won’t and almost none will accept a check or money order.
How Much Do The Loans From Pawn Shops Cost
This is another issue that is going to be determined by state and local laws in the area that you currently live in.
Most pawn shop loans are extremely affordable, well under 10%. That having been said, there are some states and cities that allow pawn shops to charge up to 25% on their loans, but since the loans are made for such a short period of time, they still normally end up costing less than what would happen or what it would cost you to not pay whatever bill of expense you had come up.
In the end, loans from pawn shops still represent one of the best and most affordable options available to you when attempting to cover an unexpected expense, pay your rent, fix your car, etc. They are typically much more affordable to alternative like payday loans and will end up putting you at absolutely no risk should you not be able to repay the loan in a timely manner.