What is pawning? How does it work?
Maybe you are a first time pawner because you were searching for pawning or how pawning works. It’s very simple to understand what pawning is. With this guideline we provide you the most important and useful information to get into the world of pawning and pawn shops.
What is pawning? We explain it to you in a few words:
Pawning is a very general term. If you speak about pawning, you speak about getting a loan based on collaterals. Pawning has a lot of advantages in comparison with other loan solutions. The first and most important advantage is that pawning works without answering questions about the lenders financial situation. To get into, we summarize the most important benefits for you:
- Pawning works without answering questions about the lender’s financial situation
- Pawning is also possible for unemployed persons
- Pawning never infects the lender’s credit score
- Pawning comes without an obligation to repay the loan
- Pawning means instant cash without a long handling time for paperwork
- Pawning comes with flexible loan terms
- Pawning never causes balloon interest rates
If you have decided to get a pawn loan, you need a collateral. If you are in need of $500 then you need a collateral that shows a value in the range of $700 to $1,000. A reliable pawn broker will approve pawn loan amounts between 40% and 60% of the resale value. Here are some examples:
You need resale value of your collateral
Which collaterals qualify for pawning?
It depends only on the pawn shop which collaterals can be used to secure a pawn loan. Normally, pawn shops accept gold, silver, jewelry, coins, electronics, watches and diamonds. Some more pawn shops are also willing to accept collectibles and art. But you can also pawn cars, tools, machines, guns and other items. Some goods need a specialized place but most valuables can be handled by your neighborhood’s pawn shop.
The sustainability of the items that you would like to pawn, also infects the amount that you can get lend. Probably, you can get lend up to 70% of the resale value of gold, coins or diamonds. For goods with a higher risk of fluctuation in prices, you can get probably only 30% or 40% of the resale value. Items like tablets, cell phones and other electronic stuff can be handled like that. Don’t overestimate the value of your goods that you would like to pawn, it could turn out that you get less money than you have expected before.
Pawning causes monthly interest fees and sometimes a service charge. It depends on the local law which interest fees pawn shops are authorized to charge you. Some states allow pawn shops to ask for up to 30% of interest fees. Therefore it’s very important to compare the interest fees of your local pawn shops before you pawn. But don’t get frightened! Reliable lenders will ask for very much lower interest fees. reDollar.com, is asking for only 5% of interest fees for pawning jewelry.
Pawning in comparison with a payday loan
You need $500, for example. And you need that cash for 3 weeks. What do you think? Is pawning more affordable than a pay day loan? Figure out:
|Interest fees||APR||loan term|
|Payday Loan||$58||352.8%||3 weeks|
|Pawn Loan||$25||60%||3 weeks|
Now you learn, pawning is a great alternative to payday loans. Furthermore, you have to be employed to be eligible for a payday loan. Nevertheless, keep in mind that also pawning is only a short term solution for financial needs. If you look for a long term loan, speak with your banking administrator first. Find out if you qualify for a more affordable loan type. But go ahead with a pawn loan, if you have comprehensible reasons for avoiding a credit check. Each personal situation needs a special solution. Figure out carefully what helps you out of your financial problems.