What Happens When You Apply For Pawn Shop Loans?

What Happens When You Apply for Pawn Shop Loans

Despite the stereotypical images of rundown storefronts sandwiched between a check-cashing outlet and a dusty display case of jewelry and firearms, pawn shops are a valuable resource when it comes to short-term funding options. Pawn shops offer loans based on the resale value of your belongings, with the National Pawnbrokers Association reporting that the average size of a pawn shop loan is $150. Loan terms, interest rates and fees vary by state, but most pawn shops require you to leave your collateral with the shop while you pay back the loan plus interest in a set time period (often 30 days).

Apply for Pawn Shop Loans  are attractive for people who need quick cash and have valuable items to offer as collateral. Their qualification requirements are less stringent than those for personal loans, with many pawnbrokers willing to lend a percentage of an item’s resale value without even a credit check. This can be helpful for people who have been turned down by other lenders due to bad credit, but it’s important to note that defaulting on a pawnshop loan can damage your credit.

How to Choose the Right Pawn Shop Near You

The biggest drawback of pawn shop loans is that they typically don’t help you build your credit, as the lender won’t report your repayment to the credit bureaus. Additionally, you’ll lose your item if you fail to repay the loan within the given time frame. For these reasons, a pawn shop loan should be considered a last resort option only, and you should explore alternative financing options such as personal loans before deciding to use this type of funding.