A lot of us have attics or basements filled with valuable stuff. Instead of leaving them there to collect dust, why not bring them to a pawn shop to earn quick cash? But if you’re clueless on how to get a loan from pawnbrokers, we’ve got you covered.
Technically, you could easily walk out with cash in hand. However, newbies should first learn how these transactions work even before they step into a pawn shop.
In our article, we’ll give you all the vital and essential details needed to start getting loans from pawnbrokers successfully. We’ll even add stuff that should be avoided to ensure a smooth transaction with them.
The Pawn Brokers and Pawn Brokering
When it comes to pawnbrokers, they provide you with convenient, immediate, and confidential ways to borrow cash. They can help with short-term funds that can be met without credit checks or legal results if unpaid loans arise.
As for pawn broking, it establishes a certain discipline on the person who borrows. Keep in mind that pawn loans don’t let borrowers over-extend their credit or get into bankruptcy.
Compared to personal loans, pawn loans are a quick way to borrow cash. The reason for this is it doesn’t involve any application process or credit checks. Plus, the amount you’re loaning will be according to the value of the item you’ll be pawning.
How to Get the Loan from Pawn Brokers
Pawn loans need you to offer valuable collateral for the cash you’ll borrow. These are often small amounts, which you’ll need to pay back a principal and interest.
Here are the basic steps in getting loans from pawn brokers:
Visit a Pawn Shop then Have Your Item Checked
Here, the staff will check and evaluate the value, condition, and resale potential of the item you brought in. From there, they’ll decide whether to give you the loan or not. If you’ve have an item of value, the shop will possibly consider it for collateral.
Collateral-based Loans
Collateral-based loans are loans protected by something with value. Here, you bring something you own. If the pawnbroker is interested in the item, he or she will offer you the loan.
Then, the pawn broker will secure the item until you’re able to repay the loan you made. The amount of the loan will be a small part of the item’s total value.
Often, pawn shops offer up to 60% of the item’s resale price. With that, we suggest that you shop around when taking out pawn loans. It’s because some shops may likely offer a higher amount for a specific item compared to others.
In addition to that, you can outright sell your items to the pawn shop if that’s what you prefer. However, keep in mind that the pawn brokers aren’t that enthusiastic about it. The reason? Loans offer better profit-potential for them compared to selling the items to them.
Agree to Their Terms and Getting to Get the Loan
To succeed in getting loans from pawn brokers, you’ll have to agree to their terms and conditions. These loan terms usually range between 30 days to a couple of months.
For interest paid on your loans, these depend entirely on state laws and your history with the shop.
Do remember that the owners of these pawn shops are resellers” and not collectors. Just because collectors value, let’s say, a vintage item at $100 doesn’t mean you’ll get the same from pawnbrokers.
With that, it’s best to set prices ahead to prevent making snap decisions that you may regret after.
Once all that’s done, leave the pawnshop with your cash, pawn receipt, and ticket. The latter usually consists of the loan term, necessary fees, grace period, and date when the pawn loan will be in default.
Repaying the Loan
When it’s time to repay the pawn loan, make sure you follow the agreed terms so the shop will return your items. If you fail to do so, the shop will sell your item to collect the money they loaned you.
It’s also likely that you’ll get charged additional fees for any late payments during these instances.
When repaying your loans, there are usually two choices for repayment.
One is paying the balance along with the loan amount and all additional fees. These should be settled before the deadline, which is often one to four months after the primary transaction.
If, by any chance, you can’t repay on the original due date, it’s possible to extend or even renew the loan. It all depends on the laws in your state/location.
If you aren’t able to pay the loan, the pawnshop keeps the item or sells them to get their money back. Other than losing your item, there are no other consequences to it. That’s the good thing about pawning items: no collection actions, and there are no issues with your credit report.
To note, about 80% of customers reclaim their items. This is based on studies from the National Pawnbrokers Association.
Commonly Pawned Items
Pawn shops accept most profitable and valuable items, including electronics, diamond or gold jewelry, firearms, and musical instruments. Some shops may specialize in specific items, while others accept larger items with more value, like cars. However, most are small businesses offering small loans.
Generally, the current appraised value of an item is the basis of pawnshops when setting a value for an item. Of course, it also depends on your item’s current condition and the ability to sell it.
Pawn brokers utilize research tools to determine an item’s value and see the amount of money you can loan. For the appraisal process, it depends on the type of item; jewelry and electronics are evaluated differently.
Interests and Fees
The interests and fees in pawn loans can be a little complicated. The rules on pawn fees vary from one state to another. Make sure you understand the interests and fees before leaving the pawn shop.
Pawnshops are mostly all state-regulated, and interest rates can vary. In Indiana, the annual percentage rate is capped at 3% per month. However, pawnshops can have additional monthly charges that reach up to 20%, making the total charge 23%.
But since the pawn industry is evolving quickly, a lot of pawnshop operators are voluntarily reducing these maximum rates. This is especially true for larger pawn loans, which are becoming more common nowadays.
You can check your state’s website to know the maximum rates for pawnshop transactions allowed in your area. You most likely find this information in the consumer protection section.
Moreover, be sure that the pawn broker explains all the fees involved in your loan before finalizing your transaction. These terms should be written on your pawn ticket for transparency.
Additional Tips When Getting a Pawn Loan
If you’re considering to pawn something, here are additional tips to keep in mind:
Choose the Right Items to Pawn
Before getting a pawn loan, choose the right items to pawn first. Remember not to offer anything that is outdated and of low-quality.
Have a Backup
As mentioned, you’ll receive cash and a pawn ticket when you accept a pawn loan. The pawn ticket is needed to get your item back, so it’s best to have a backup of it. It’s suggested to take a photo of the ticket and send it to yourself via email.
Be Prepared to Fill Out Some Paperwork
Pawn brokers will confirm if you’re the legal owner of the item you’re pawning. To do this, they will ask you several questions, so be prepared. Pawn brokers do this to ensure that you’re legitimate, and the item being pawned has value and is owned by you.
When doing business with a pawn broker, expect to be asked for a government-issued ID since it’s required by law.
Check Your Item’s Condition and Be Prepared to Prove Your Claims
Before having your item pawned, make sure it’s in good condition. Check for scratches, cracks, and broken or missing parts. If it’s a gadget, see to it that it’s working.
If you bring a piece of valuable jewelry, have a professional jeweler write up an appraisal. This way, you can prove its value.
For battery-powered gadgets, be sure to replace the batteries with new ones to show that it works. Also, it’s best to bring the item in its original packaging together with its other accessories.
To put it simply, think of how you want the item to be if you were to purchase it. Of course, you want it to be in good condition with complete parts and accessories.
Advantages of Getting Loans from a Pawn Broker
If your credit is rough, you’re likely unable to get a traditional personal loan. If that’s the case, getting loans from pawn brokers can be a great option when you need quick money.
If you don’t have a bank account or a cosigner, getting pawn loans is easier since you won’t need a credit check. You also won’t have to worry about credit scores and receiving multiple calls from debt collectors.
The only consequence of failing to pay your pawn loans is, you won’t retrieve your item.
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