If you’re currently in such a pinch, you’re likely thinking of taking out a personal loan. Unfortunately, it’s not that easy, especially since these loans have a rejection rate as high as 76%.
There’s still some good news though: you can use your car as a security for car pawn loans. As they are a type of secured loan, these pawn loans are easier to qualify for.
The question now is, what exactly is an car pawn loan? How does it work and what are the requirements you need to meet?
We’ll get to the bottom of all these questions in this guide, so be sure to keep reading!
A Primer On Car Pawn Loans
Pawn loans are short-term secured loans. As with any other pawn item, the pawnshop gives you a cash loan in exchange for your car. Your automobile, in this case, is the security or collateral for the loan.
In most cases, the maturity date of these pawn loans for your car is up to 30 days. Meaning, you have up to a month to pay back the loan.
Revving It Up: How Much Money Can You Get With a Auto Pawn Loan?
The amount of money you can get with a pawn loan depends on the value of your ride. Even if you have an older car, say a 2010 model, you can depend on reliable pawn lenders in Pompano Beach to give you a loan. The minimum amount of money you can get is $500.
Of course, the newer your wheels are and the more bells and whistles it has, the bigger your loan amount can be. So long as your car’s current value is worth over $1,500, you’re more than likely to secure a quick loan.
What the Pawning Process Entails
Since you’re pawning your car, the first requirement is to bring it to the pawnshop. This way, the pawnbroker can also assess and inspect your ride and its condition. Be sure you have your driver’s license with you, as well as your vehicle registration and auto insurance.
The most important qualification for a car pawn loan, however, is a clear title. This means that there’s no longer a lien against the vehicle you’re about to pawn. A lien may be in the form of a car loan — the same loan you took out when you financed the purchase of your ride.
If you’ve paid off your entire car loan though, then it’s highly likely that you already have a clear title. In this case, you already have complete vehicle ownership, so it’ll be easy to qualify for a pawn loan.
Once the pawnbroker finishes reviewing your documents, you’ll receive a loan offer. All that’s left for you to do is to review their offer, particularly the interest rate or pawn service charge.
In Florida, the pawn service charge, including interest, can’t be more than 25% per month. Pawnbrokers can apply this fee for each 30-day pawn transaction. The minimum pawn service charge they can receive is also set at $5 for each 30-day transaction.
If you like the offer, then you only need to agree and sign the pawn loan contract. You’ll then receive the cash on the spot, and you just need to pay it back on or before the maturity date.
Safe Storage of Your Prized Ride
Since it’s essentially a pawn loan, you’d generally have to leave your car with the pawnbroker. Don’t worry though, as Florida law requires pawnbrokers to securely store pawned goods. They also need to maintain pawned items in an “unaltered condition”.
This means that you don’t have to worry about other people driving your ride while it’s pawned. You can expect it to be in the same condition as when you first left it with the pawnbroker.
Paying Back Your Car Pawn Loan
As car pawn loans are short-term loans, make sure that you can pay back your dues on time. If you can’t repay the loan on its maturity date, consider extending its due date. This way, you’ll be able to redeem your car once you can pay back the loan in full.
Your repayment will include the loan amount, interest, and pawn service charges.
Car Title Loans vs Pawn Loans
Car title loans are similar to auto pawn loans in that they’re also secured loans. However, auto title loan lenders usually keep only the title and not the entire vehicle.
While this sounds like a better deal, title loans often come with a lower loan amount. Most also carry an interest rate higher than car pawn loans.
After all, the title lender won’t keep the actual car as guaranteed security. This then puts them at a higher risk of defaults or non-payments. As such, they have to either lower their loan offers or increase their interest rates.
If you need a bigger loan amount tied with a lower interest rate, a pawn loan may be a better choice.
Advantages of Pawning Your Car vs Taking Out Payday Loans
Payday loans can be costlier than auto pawn loans since they can have a term-based interest. For example, payday loan lenders in Florida can apply weekly interest charges on a loan.
Granted, payday lenders can only charge an interest rate of up to 10% of the loan amount. However, that 10% is applicable for each loan term. So, that means you may end up paying that 10% several times if you keep extending your loan.
Let’s say that you take out a payday loan with a one-week term. Let’s also say that you needed to extend the loan three times. That then sums up to a total of 40% interest charges.
Whereas car pawn loans will only charge you a one-time interest for a 30-day loan. You’ll only have to pay more if you choose to extend the loan for another month. Still, that’s a lot less than if you keep extending a payday loan.
Besides, auto pawn loans come with a bigger loan amount. Payday loans usually start at $100, whereas it’s $500 for car pawn loans.
Car Pawn Loans vs Traditional Bank or Personal Loans
As for personal loans, those that come from banks are not exactly your quickest option. Their processing times can take days or even weeks — not the best for emergency situations. Moreover, they require a lot of documents, which, if you fail to provide, will lead to loan rejection.
Also, keep in mind that most personal loans require a credit check. Lenders do so to confirm not only your repayment ability but your credit score too. If you have a credit score that falls below the “good” standard, you’re unlikely to get qualified for a bank loan.
Unfortunately, Florida’s FICO scores in the second quarter of 2019 only averaged 694. That’s below the 703 nationwide average.
Meaning, more of the Sunshine State’s residents may have a score that’s lower than 670. 670 is the borderline for credit scores considered to be “good”. If your score falls below this, lenders may not extend you credit.
With car pawn loans, your credit score won’t be an issue, as pawnbrokers don’t even have to carry out a credit check. So long as you meet the requirements, then you’re likely to get approved for a loan with flexible values and terms.
Cars Aren’t the Only Vehicles You Can Pawn
Cars are the most pawned vehicles in Florida, as it’s home to over 1.1 million registered motor vehicles. If you’re the full owner of one of these vehicles, you have the right to pawn your ride.
There are also pawn loans for other vehicles such as motorcycles, RVs, trailers, and trucks. As with pawning a car, how much you can loan also depends on the vehicle’s value and model year.
Deal With Emergency Costs With the Help of a Car Pawn Loan
There you have it, the only guide you’ll ever need to understand how auto pawn loans work. Now that you know what they are and their advantages over other loans, you can make a wiser decision. If you need a short-term loan that’s more affordable than a payday loan, then a car pawn loan may be your best bet.
Ready to get your emergency expenses dealt with ASAP? Then please feel free to get in touch with us now! We’ll be more than happy to answer your questions about our pawn loan services.