It is not unusual for anybody to suddenly face a financial crunch. At times, you may have unexpected medical bills, perhaps find it difficult to pay the tuition fee of your child, or have no arrangements for making a timely payment on the loan you may have availed for buying your house. That is normal, at some time or the other, anybody can have unexpected expenses. Under such circumstances you have two options. One is to sell some of your personal belongings. The other option is to borrow money from a pawnshop.
Before you approach a pawnshop for taking a loan, you should understand this business and you need to be aware of a couple of things.
1. What’s a pawn shop? It’s a business which provides loans for short-term against collateral. Collateral can be any valuable item. Some pawnshop owners also buy and sell used or new items.
2. How is the business of pawnshops different from payday loans? Payday loans are typically short-term loans and available only to those having a proof of getting regular paychecks. These loans also take into consideration your credit score. Pawnshops extend the loan against collateral. If you fail to return the borrowed amount, the pawnshop owner retains the stuff offered as collateral.
3. What is the modus-operandi of a pawnshop? The process is quite simple. You call upon a pawnshop with the item you intend offering as collateral, the owner of pawnshop assesses its worth, and based on his assessment, he offers you a loan. Usually, you get about 50% of the price of the offered collateral. The duration of the loan is usually ninety days, but it can be renewed by paying additional fees.
After you return the borrowed amount in full, the collateral is returned to you. The conditions of the loan are generally offered in writing on the pawn ticket given to you at the time of accepting loan.
4. What is the amount of money offered by pawnshops? Primarily, it depends on the item you offer as collateral. The loan may be as small as just hundred dollars or it could be thousands of dollars.
5 What are the consequences of not paying back the loan? If you fail to return the amount borrowed, the pawnshop simply retains the item you offered as collateral.
6. Is your credit score affected on borrowing funds from pawnshops? Pawnshops do not verify your credit while offering loans. You just need to mortgage your item for getting loans. Even when you fail to payback the borrowed money, the matter is not reported to any credit agency.
7. Items that may be offered as collateral for taking a loan from a pawnshop: You should understand that the items you offer as collateral should easily be disposable by the pawnshop when you are unable to return the borrowed amount. Most pawnshops would generally accept any household item as collateral, deepening on the amount to be borrowed. They prefer small expensive items, like expensive jewelry, coins, musical instruments, collectible items, home electronics and weapons. Some pawnshops would also accept larger items, including boats, cars and motorcycles.
8. Are pawnshops officially authorized? Yes, it is a legally approved business, with each state having defined rules and regulations in regards to who can operate and from where, as well as the kind of services that can be offered. It is strongly recommended to always deal with licensed pawnshops.