Almost 25% of Americans don’t have access to traditional banking services. For these families, pawn shop loans can help cover the cost of financial emergencies.
You may be wondering, what’s a pawn shop loan? It’s a loan that you get for providing a car, truck, or other assets as collateral. If you fail to pay, the pawn shop can take control of your asset.
Keep reading to learn more about how pawn shop loans differ from other loans.
A common type of loan for a car or another vehicle is an auto loan. If you can’t afford to buy the car in full, you make payments on a loan over a few years.
Many of these loans are secure for the lender, and it allows the lender to take the car back when the borrower doesn’t pay. You can take out an auto loan for almost any form of transportation you want to buy.
The typical loan period is two to six years, but you may occasionally find longer terms. Interest rates also vary from about 3% to 7%.
The interest rate can depend on the length of the term and the borrower’s credit history. You don’t need a specific minimum credit score, but the higher yours is, the better auto loan terms you will get.
Auto Title Loans
An auto title loan uses your car title to secure a loan and continue to drive the car. You can get up to half of the vehicle’s value at the time of the loan.
Meanwhile, the lender may repossess the car if you don’t pay the loan back on time. Nevertheless, an auto title loan has a short-term payback, and it’s usually a month to 12 months.
Depending on the lender and state, you may be able to extend the loan. Some title loan companies amortize their loans, and others have rollover interest-only payments. Title loans generally are higher-interest loans with other fees combined.
If you can’t pay your lender, try and work out better terms or sell your car to pay off the title loan. Be careful with taking out such a loan, especially if the lender won’t let you extend the terms.
A personal loan is another option if you need to pay for a car or boat but don’t have the cash. You usually need to go to a bank to take out a personal loan, and you can use it for a variety of things.
Depending on where you go, the loan minimum can be $1,000 to $3,000. Your loan can be as large as $25,000 to $100,000 in some cases.
The interest rate for a personal loan will vary based on the amount, loan term, and your credit score. Rates can be anywhere from 6% to 36%.
You will need a decent credit score, and the minimum is often between 600 and 700. If you get a secured personal loan, you will also need to put up a car or another asset as collateral.
Pawn Shop Loans
If you need money quickly, you can get a car or boat pawn loan, for example. Auto pawn shop loans are short-term loans, and you can also get money by “selling” an item to a pawn shop.
The shop will give you cash, and you can get your collateral back by paying off the loan plus interest. Some pawn shops have higher interest rates, but others offer lower rates to keep you out of a cycle of debt.
Depending on the value of your car, you can get anywhere from $500 to $50,000 from pawn shop loans. Consider how they differ from other popular loan types.
Pawn shop loans always use collateral, and the item you pawn is that collateral. If you can’t make a payment by the pawn default date, the shop will take control over the asset.
You can ask the pawn shop to extend the terms of the loan, but you will need to cover the current interest and pawn service charges for doing so.
If you have a car, boat, motorcycle, truck, trailer, or RV that you don’t need right now, pawning it can be a good option. You can use the money to pay for other things, and once you make back that money, you can collect your vehicle.
When considering pawning vs selling your car, think carefully about your decision.
For example, if you sell it, you will no longer own it. But with a pawn loan, the pawn shop will store the car while the customer makes timely payments on the car which they still own.
The term length of pawn shop loans is usually more flexible than personal or auto loans. Many auto pawn shop loans have a loan term of 30 days. However, they may be extended unlimited number of times.
So if you can’t pay back the loan on the maturity date, you can extend the term. And like other loans, you can make additional payments that will be applied towards the amount financed.
Most pawn shops will apply smaller payments to the interest and service charges first. Then, if you pay more than the monthly minimum, the result is less interest and pawn charges the following month.
Before you take out a pawn loan though, make sure you will be able to repay the loan amount in time. If not, consider a smaller loan that has just the cash you need.
If you decide to get a personal loan or auto loan, you will almost always need a good credit score. Your score doesn’t need to be perfect, but the better it is, the better your loan will be.
However, pawn shop loans focus more on the vehicle or other asset you bring in. It doesn’t matter what your credit score is, so it can be an excellent option for anyone with a less than stellar credit history.
Whether you don’t have a credit score or need to work on it, you can get pawn shop loans to cover short-term expenses.
And because you don’t have to worry about your credit score, you can get a pawn loan much more quickly than a personal loan.
Getting Pawn Shop Loans
Having an unexpected expense is never fun, and it can be more stressful if you don’t have money in savings. But if you have a car or boat that you don’t need, you can use it for cash.
Pawn shop loans let you pawn your vehicle for a small, short-term loan. Once you pay back the loan, you can get your car back.
Are you ready to get started? Contact us to learn more about the loans we offer.