Have you ever heard about pawn shops or that you can pawn something to get a little cash to help you pay for an expense? Do you not know what it means?
Well, let’s just explain it so that you understand exactly what it means to pawn something.
A pawn is a form of short term loan that you can use to come up with some quick cash to get you through what may be a rough period of time for you.
These loans aren’t meant to be a long-term financial solution by any means so don’t think that it is a good idea to depend on them.
They are really meant to be used as needed to help see you through a rough period or get you beyond some sudden emergency expense that has come up.
That having been said, there are a lot of people that use pawn loans regularly and that is perfectly okay. You just have to manage these loans appropriately so that they don’t get out of hand.
What Is A Pawn Loan
When you “Pawn” something, you are basically letting a pawn shop hold onto a valuable item for a period of time and they will give you cash that you can use to cover your expenses.
How Much Can You Borrow
The amount of money that they give you is directly related to the used market value of the item or items that you pawn.
For instance, if you pawn a $20,000 ring you are going to be able to barrow much more than if you pawned your old collection of Xbox 360 games.
How Do Pawn Shops Know How Much To Lend You
Pawn loans can help you get the money you need for short term expenses.
Typically a pawn shop will research your item on website that act as marketplaces for used merchandise. That normally means eBay and Amazon as many people buy and sell used items on these sites.
They will look for items in similar condition as yours that are just about as “Complete” as your item. That means that if you are missing pieces or parts that originally came with whatever you are pawning, you will probably be offered less for it.
Additionally, if your items has a bunch of marks and scratches, the amount of the loan that the pawn shop offers you will also be less than if the item were in ‘Like New’ condition.
How Long Are These Loans For
Normally speaking, your average pawn loan will be a 30-90 day loan, although some states allow much longer periods.
The length of the loan will depend on your local State and City laws as pawn shops are regulated on the state level and have to operate according to these laws.
In most states you can either renew or rewrite a loan as long as you pay the past due interest of the loan.
So for instance, if you borrowed $100 in Ohio and paid the $5 interest plus $4 storage every month, your loan could remain valid and active for as long as you needed it to.
How Do You Get Your Item Back
When you are ready to reclaim your item(s) you would need to pay back the principle of the loan as well as any remaining past due interest (and storage if it applies.)
You will be given back your item(s) in the exact same condition that you left them in. Most pawn brokers are very detailed individuals that take pride in their business and as such they are going to take good care of your merchandise while it is in their pawn shop.
How Much Do Pawn Loans Cost
Typically speaking, most pawn loans are very affordable forms of short term lending – much more so than your average payday loan.
The exact amount of interest that a pawn shop can charge is determined by the local State and City loans where you live and those rates will vary state by state.
Are These Loans A Good Idea
Pawn loans can be a good idea to help you through a rough time or to help you pay for a sudden, unexpected expense that has come up out of nowhere.
That having been said, you should keep in mind that they are purely meant to be short-term loans and you shouldn’t let them get out of hand.
But sometimes you may need to make more than one loan and that is okay. It happens to a lot of people and there really isn’t anything wrong with making multiple loans out as long as you can manage them effectively.
In the end, a pawn loan is as good of an idea as you are able to manage it and pay it off in a reasonable amount of time. After all, these loans will often charge you a small interest percentage every month so the sooner you are able to repay the loan and get your item(s) back, the better.
Mandy Dormain started working for Pawn Nerd in 2020. Mandy grew up in a small town in northern Tennessee. But moved to New York for university. Before joining Pawn Nerd, Mandy briefly worked as a freelance journalist for several radio stations. She covers politics and economy stories.
