There are some pawn shops that offer payment advance loans for people who are in need of money urgently. Pawn shops usually offer small loans that range from $75 – $100. It is much easier to get a lawn from a pawn shop compared to applying for a loan at a local bank but you might want to consider its disadvantages prior to making a decision. The following are some of the drawbacks of getting a loan from a pawn shop.
Most pawn shops’ loans have short repayment period, for example 30 – 60 days, so it is unwise to apply for the loan if you know that you won’t have access to enough funds to pay back the loan in such as short period of time. You have the option of extending the loan period if you don’t have enough money to pay back the loan when the due date arrive. But, you must remember that you have to pay higher interest if you roll over the loan so that it becomes more expensive to afford the loan.
Secondly, you have to use anything of value as a collateral to secure the payment advance loans at the pawn shop. Example of items that you can pawn are jewelry, and electronic gadgets. Usually, the pawn shop will give a much lower appraisal for the valuable item compared to the appraisal value in the market. So, you have to prepare more valuable items to use as collateral in order to obtain the loan from the pawn shop. There are some pawn shops that are willing to negotiate the appraisal value of the valuable that you want to use as collateral.
Thirdly, pawn shops’ loans have incredibly high interest rates that makes it very expensive to repay them. The average interest rate that is charged on a pawn shop loans is about 120% – 300%. Every state has a different limit on the highest interest rate the pawn shop is able to charge. You should only apply for this type of loan if you are in a desperate situation and there is no other way for you to borrow the money you urgently need for covering your emergency expenses.
The pawn shop will also charge you other fees, for example storage cost and fees for the insurance coverage of the collateral. If you are unable to repay the loan, your collateral will belong to the pawn shop and they have the right to sell it to get back the money that you fail to pay on the loan. In some states, the pawn shop is supposed to return to you the excess money from the sale of your collateral. However, you should not expect to get any money back if you decide not to pay back the loan.
