These days, more and more people find themselves in a financial pinch but don’t know where to go for help. If this sounds familiar, know that you are not alone and that there are options out there for you that will not put your financial future at risk. Before you consider using other forms of financial assistance, such as payday advance loans, keep reading to determine why a pawn loan is a much safer, confidential, and convenient alternative.
First, we’ll discuss what each type of loan is and how it works:
Payday loans
Payday loans are high-interest loans granted against a post-dated check that you provide to the loan company. The amount you can borrow and the deadline to repay the loan depend on your income and the frequency you are paid. Payday loans require that you disclose a significant amount of information before you receive your money. You will have to provide pay stubs, proof of permanent residence, and one or more recent bank account statements in most cases.
Pawn loans
Pawn loans are cash loans granted against a percentage of the value of an item that you pawn as collateral. Items used to obtain pawn loans are usually things like jewelry, tools, electronics, or musical instruments. The amount loaned to you will depend on the value of the item. If you repay your loan within the pre-determined time period, you will get your item back. If you do not repay within the repayment period, the pawnshop keeps your item and puts it up for sale in their shop.
There are three very significant differences between pawn loans and payday loans that can ultimately help you realize that pawn loans are the safer choice between the two.
Impact on credit score
Payday loan stores require that you submit a personal check; if there are insufficient funds in your checking account to cover the loan when it becomes due, your loan is considered to be in default. Also, you may be hit with substantial overdraft charges from your bank. If your debt is not paid off within a set period, the payday loan store may sell your debt to a collection agency, which will report your default to the three major credit reporting agencies.
Having a default on your credit report can seriously harm your score, which can have a negative impact on such vital aspects of your life, such as housing, employment, and getting a loan again in the future.
On the other hand, pawn loans have virtually no impact on your credit score because you are not required to provide banking, employment, or credit info to get a pawn loan. If you happen to default on your pawn loan, the shop gains the legal right to resell it to recoup the amount of the loan.
Interest Rates
Payday loans have atrociously high-interest rates from the get-go, usually around an astounding 400% APR. This type of interest traps many people in a vicious cycle of paying only the loan month to month, while the principal amount sits unaffected, sometimes for years.
However, Pawnshops are held to standards by their state that limits the interest they may charge. As a result, most borrowers find that the fees and interest on pawnshop loans are far easier to work with and pay off than payday loans.
Repayment Period
Payday loans are dangerously rigid in the repayment period. Usually, repayment is due in full when you are next paid. Extensions and payment plans are possible, but not without incurring additional fees and increased interest rates.
Pawn loans are much more flexible regarding repayment. Pawnbrokers can work with you on loan periods, sometimes extending up to four months for repayment. Pawnshops also have more leeway to work with borrowers to reach terms that are agreeable to both parties. Other factors, including the borrower’s history with the pawnshop and being proactive in requesting additional time to repay, can influence every aspect of the pawn loan process.
For many who find themselves in a financial bind, a pawn shop loan is hands down the best option. To recap: pawn loans take only a few minutes, do not require you to disclose extensive personal information beyond a valid ID, and do not force you to put your hard-earned credit score at risk. Even more significant, you don’t flirt with the financial disaster of getting trapped in an endless cycle of debt.
what role pawn shops play in your community, it’s time to think again. Pawnshops are a proven helpful alternative to other forms of loans, especially payday loans. Pawnshops are also regulated by federal, state, and local laws. Additionally, most pawnbrokers, such as those you’ll find at Azusa Pawn, are run by honest individuals who want to help their communities. Since ancient times, pawnbrokers have been sources of help in times of need.
At Azusa Pawn, our mission is to get you the cash you need and to do what we can to help you avoid a cycle of debt. Also, we love to help those who might not have access to traditional financial resources that so many others take for granted. We understand that just because you are having monetary trouble or do not have access to mainstream banks doesn’t mean that you are undeserving of respect.
Why is Azusa Pawn the best choice?
As one of the fastest-growing pawn shops in the San Gabriel Valley, Azusa Pawn is becoming the pawnshop of choice for those who need a quick cash loan. By any measure, pawn loans have minimal impact on your financial well-being and are more user-friendly than payday loans. Pawn loans are meant to be helpful and give you the time and space you need to get back on your feet. If you have an item of value, bring it to us, and we will show you why we are the clear choice for your loan.