A pawn loan is a type of loan where you use an item of value that you own as collateral in order to borrow money. If you are unable to repay the loan, the lender will keep the item as payment.

Let's take a deep dive on pawn loans, exploring how it works, its benefits and how it holds up against a payday loan. 

How Does a Pawn Loan Work?

If you need money quickly, you may have been told to get a payday loan. With this type of loan, you use your next paycheck as collateral. 

While you can borrow a significant amount of money with a payday loan, there are many downsides to this type of loan. High interest rates, short deadlines, and damage to your credit are all reasons why people dislike payday loans.

Benefits of Pawn Loans

1) No Income Check

Pawn loans are one of the few types of collateral loans that don't require an income verification. You can borrow from a pawn shop and use your valuables as collateral without having to prove you have any source of income at all.

2) Flexible Payoff

Pawn loans are often a great option if you need a short-term loan. You can borrow as much or as little money as you need, and you can repay the loan in full at any point. This means that you have the flexibility to repay the loan in full whenever you are ready, rather than having to make a set monthly payment.

3) Better Interest Rates

Pawn loans offer much better interest rates than many other types of loans. This is because the collateral you use to secure the loan ensures that there is very little risk for the lender. Because of this, they are able to offer lower interest rates than many other types of loans.

4) Easier Transactions

Pawn loans are very easy to get. This is due to the fact that there are very few questions asked in the process. The lender will simply assess the value of your collateral and prepare the loan amount. You can then take the money and leave the collateral with the lender as security.

Pawn Loan vs. Payday Loan

The main difference between the two is that a payday loan is a short-term loan and must be repaid within a few weeks. Pawn loans are loans that can be paid back over a longer period of time. The borrower does have the option of repaying the loan early, but most choose to carry the loan for the full term.

Both types of loans are considered high interest rate loans. However, the interest rate on a pawn loan is typically lower than the interest rate on a payday loan. The interest rate on a pawn loan is often determined by the length of the loan. 

The longer the loan, the higher the interest rate will be. Pawn loans are often used by people with bad credit because they are able to get the funding they need without having to go through a credit check.

Conclusion

If you’re considering a pawn loan as a way to get emergency funds, make sure you understand how it works. Do your research and make sure you get the best deal.

River City Pawn has all the resources you need to make a pawn loan. We are a pawn shop in Murray, KY and we will guide you through the process. Get in touch with us today to learn more.