4 Things You Need To Know About Getting A Loan From A Pawn Shop

If you need to obtain a loan, and you don't have a great credit score, one way to get a quick loan is through a local pawn shop. Here are four things you need to understand about getting a loan from a pawn shop.

#1 You Need To Bring Something To The Table

When you get a loan from a pawn shop, you need to make sure that you are bringing something to the table. You are being offered a loan based on the value of the item or items that you bring in. You are going to need to bring in enough items of value to meet the amount of money that you want to borrow.

The items that you bring in work as collateral for your loan. If you fail to pay back your loan, the items that you brought in will be sold to repay your debt.

If you need a good amount of money, make sure that you bring in valuable items that the pawn shop needs. To get an idea of what types of items your local pawn shop is looking for, give them a call.

#2 You Are Offered A Percentage Of The Value

It is important to realize that you are not going to get a loan on the full value of the object. The loan will be based on a percentage of the overall retail value, not its full value. This dynamic is in place so that if you don't repay the money, the pawn shop will actually make some money on the item.

For example, if you have a guitar that retails for $1,000, the pawn shop may offer you 60% of its value, or $600, for the loan. You only have to pay back the value of the loan that was offered to you along with interest by the due date to get back the collateral, in this case the guitar, that you offered the pawn shop.

#3 Be Prepared To Pay Interest

Finally, be prepared to pay interest on the loan amount. The interest for a pawn shop loan is generally on the higher end. The interest rate will be higher that what you would pay if you took out a traditional bank loan, but is generally significantly lower than what you would pay on a payday loan, for example. The exact interest rate that you'll have to pay varies from state to state as this is a generally a regulated practice, so pawn shops can only charge a certain amount of interest based on rules set by the state.

Be aware that if you don't repay the loan, you will lose whatever items that you put up for collateral. These items will become the property of the pawn shop and they will sell these items in order to recoup the money that they offered to you. However, on the plus side, not repaying a pawn loan will not negatively affect your credit score, so it is a good solution if you need money that you know you will not be able to pay back. For more information, contact a shop like Pomona Pawn Shop.