When you are looking for getting cash for covering any unexpected expenses, you can consider taking a pawn shop loan. This loan can be used as a last resort when you need an emergency fund for covering your expenses. Most pawnshop loans are very expensive for customers. For example, when you borrow $100, you may have to repay up to $175 after 90 days. You need to understand that there are many other types of loans that are available on the market now. You can compare some available loans, for example, credit cards, personal loans, and any other alternatives before you decide to take a loan for your needs.
How Pawn Shop Loans Usually Work
Pawnshop loans are usually secured short-term loans. When you take a loan from any pawn shops, you are going to bring some valuable items to them, for example, musical instruments, jewelry, etc as collateral items. You can get back these items once you repay the loans. There is no complicated procedure or requirement for getting this loan. Most pawnbrokers are going to approve your loan based on the total value of your collateral. They will sell the items when you cannot repay the loan in the future.
They are usually suitable for small loans. The average pawnshop loan in the United States is around $150. This data is derived from the National Pawnbrokers Association. Pawnshop loans will never look at your credit history. Failing to repay the pawn loan will not affect your credit history. However, pawn shops are going to charge high interest and expensive processing fees for borrowing their money. The repayment periods of these loans are usually very short. You can have about 30 – 90 days for repaying your pawn loan.
Should You Borrow from the Pawn Shop?
Pawnshop loans are suitable for you who are looking for fast cash for your emergency fund. However, you are going to pay expensive fees for convenience and speed. Although most states create some regulations for pawn shops, they still have high caps on the total fees for these loans. For example, Georgia state allows the pawn shops to collect interest and other fees for up to 25% per month for the first 3 months and then 12.5% every month after that period. Texas lets any pawnshops charge their customers for up to 20% interest rate per month.
You need to remember that these are monthly charges. When they are translated into the annual percentage rate or APR, they can be 240 – 300% per year. As a comparison, you can compare the interest and other fees with a credit card. When you borrow $100 for 3 months, the pawnshop loans will cost you about $75 and the credit cards will cost you about $5. Because of this reason, you have to look for alternative sources to consider. There are some other types of loans that you can consider when you need immediate cash for any of your needs.
Alternative Sources to Consider
Many companies can offer personal loans to their customers. By taking these personal loans, you can borrow money without bringing collateral. You only need to show your ability to earn income. The lenders are going to review your credit history before approving your loan application. When you borrow $400 for 3 months, most US banks are going to charge about $48 to $60 for their clients when they take any personal loans.
If you are looking for some alternative sources to the pawnshop loans, you can take a look at your credit cards. You can borrow money instantly by paying any bills with your credit cards. You can also take out a regular cash advance from your credit cards. The average APR for most credit cards will be more than 20%.
This is another solution that you can use for covering some emergency expenses. If you only want to borrow a small amount of cash, you can ask your employer about taking a portion of your next paycheck now. As a consequence, you are going to receive less on the subsequent paychecks for the next couple of months. It is a powerful short-term solution for any of your emergency needs.