Pawn Shop vs. Payday Loans

Pawn Shop vs. Payday LoansIf you’re in a tough financial position, you might be considering the Pawn Shop vs. Payday Loans decision. They are each thought of in times of financial distress, but there are some striking differences between the two, and which one you go with will be a matter of what you have of value, and what you’re willing to potentially part with.

A pawn shop will either buy your items at a very low amount, or they will allow you to pawn them, which means they will give you a loan for what they consider the value of your items, and when you pay off the loan plus interest they will give you your items back. If you don’t repay the loan, they simply sell your items to cover that loss.

A payday lender on the other hand will not be taking anything as collateral, and you are basically using your job as your promise to pay the loan back. Since they will loan to just about anyone that has a job without a credit check and any sort of references, the fees are typically very high for a payday loan, and you will not have installment payments the way it will with a pawn shop loan.

Pawn Shop vs. Payday Loans: The Breakdown

We’re guessing that if you’re trying to choose between a pawn shop and a payday lender that you have something of value that you are willing to put up as collateral for a loan. Some people are not comfortable with the idea of not getting their stuff back, especially if it has sentimental value. Others view it as a strong motivating factor to pay the loan back, and keep the relationship strong at the pawn shop case you ever need to go back there.

If you have something that is really valuable, you’ll probably be able to get more money from the pawn shop than you would from the payday loan lender. This is because payday lenders are regulated by the state in many cases, and can only lend out so much money. They pawn shop doesn’t have these regulations, and as long as they see the value in-house, they will loan as much as they feel is appropriate. In this regard, a loan from a pawn shop might be your best bet if you need a larger amount of money and have something that is truly valuable.

Installment Payments
One big benefit to getting a pawnshop loan is that you can pay it off in installments rather than having to come up with the full amount on your next payday. This means that you won’t be caught in the payday trap of having to reloan the original money borrowed again and again.

Better Rates
The pawn shop will charge you interest on the loan, but it’s not going to be anywhere near the high rates that you will get from a payday lender. This is because you have something as collateral going up against the loan, and also because you are able to get the money for a longer period of time. The big reason that payday loans have such a high APR is because you don’t get to keep the money for very long.

More Private
A payday loan is actually the more private way to go if you want to keep things very personal and not let anyone know that you are in need of money. The reason we say this is because if you can’t pay the loan off any pawn shop, you will lose the item that you put up, and also your family might wonder what happened to the item that you put up as collateral, since it is stored at the pawn shop. With a payday loan, the only one that knows you got the loan is you, and if you paid on time, they will not call you or bother you at your place of employment, so you can keep it very confidential.

Overall, a pawnshop loan makes a lot of sense if you have something that is truly of value and you find a pawn shop out there is willing to give you a decent price for it. But if you only have things that have sentimental value, or you don’t want to risk losing any of your property just to get some money, a payday loan is the better choice.

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