Although there are a variety of ways you can get money fairly quickly when you need to pay something fast, some options are better than others. While many people turn to payday loans because they're quick and only require a check to secure, here are two reasons why it may be better to go with a local pawn shop loan.
It Won't Hurt Your Credit
Like payday loans, pawn shop loans don't require you to have great credit to get money. All you need is something of value to secure the loan and a reliable source of income. Where these two loan products differ, however, is a pawn shop loan won't destroy your credit if you become unable to repay the money as agreed.
This is because a pawn shop will simply take your collateral and resell it to recoup the loss. Payday lenders, on the other hand, will send your account to collections when you become past due and may even sue you in court to collect the funds owed. This can result in negative marks on your credit report that remain there for 7 years or more.
Sure, it can be hard to lose an item that's important to you if you can't pay back the money you borrowed from the pawn shop. However, a collection debt can cause your credit score to plummet up to 100 points, which can make it exceedingly difficult to qualify for credit in the future. This, in turn, can make it difficult for you to qualify for important things like housing and even some jobs.
So, unless you're absolutely certain you can keep up with your payday loan payments, it may be best to go through a pawn shop first to get the money you need.
You Can Get More Money
Another reason why pawn shop loans are better than payday loans is you can get more money. With payday loans, the amount of money you qualify for is based on your income. Additionally, some states have enacted laws that limit how much you can borrow from a payday lender. In California, for example, the maximum you can borrow from a cash advance company is $300.
With pawn shop loans, the amount you qualify for is based on the value of the item you're using as collateral. Pawns shops will typically loan a person between 25 to 60 percent of their item's value. So, if you have a necklace valued at $1,000, you could get and up to $600 loan for it, and sometimes more depending on the store. Additionally, you can even pawn multiple items at the same time to get even more money if you have a serious need to fill.
For more information about pawn shop loans or to find out how much you qualify for, contact a local pawn shop.
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