Whether you’re behind on rent, want to buy a new car, or simply need extra cash, many people decide to take out loans to pay for items they couldn’t otherwise afford to buy. But for those who don’t qualify for a conventional loan from a bank or financial institution, where can they access the funds they need?
The answer might be a pawnshop loan. While pawn shop loans, or collateral loans, might be a great way to make some fast cash, they could also be a risky solution for your short-term financial problems. What about your credit score? Will a pawn shop loan negatively affect that?
When it comes to understanding all you need to know about pawn shop loans, the experienced pawn brokers at Maxferd are here to help. Our business has been open for over 135 years and has become a trusted resource for cash for gold, jewelry repair, and, of course, pawn loans.
Here is everything you need to know about pawn loans and your credit score.
What are Pawn Loans?
A pawn shop loan is when a person borrows money from a pawn shop by providing them with an item as collateral, including jewelry, appliances, or musical instruments. The pawn shop will provide a loan based on the item’s appraised value.
If you don’t repay the loan as mutually agreed upon, the pawn shop will keep your collateral and resell it to recoup its losses. In most cases, pawn shops will lend you between 25% and 60% of the collateral item’s resale value.
For instance, if you need $500 to help pay for auto repairs, you might bring in an item that is worth between $900 and $2,000.
At Maxferd, we offer loans between $5 and $1 million. After we give you the loan, you have four months and 10 days to either reclaim your item or renew your pawn. To learn more, call us (880) 888-PAWN (7296). We’re always happy to help.
Will a Pawn Lawn Negatively Impact My Credit Score?
No, pawn loans will not negatively affect your credit score. If you fail to repay your loan, it will not be reported to the credit bureaus. However, you will lose the item you used as collateral. This means that you don’t have to worry about damaging your credit if for some reason you cannot make your payments.
Additionally, unlike bank or payday loans, pawn loans are never sent to debt collectors. That’s because the pawnbroker already has the item you used as collateral on hand.
How Do Pawn Shop Loan Collaterals Work?
When you take out a loan from a pawn shop, you will need to provide some sort of collateral. The best types of collateral are jewelry, camera equipment, electronics, or musical instruments. The pawnbroker will evaluate the item’s worth and determine how much money they can give you according to the item’s value. You may also have to provide proof that the collateral item belongs to you.
Afterward, the pawnbroker will give you a pawn ticket that provides specific details about your loan, including interest fees, the repayment terms, and any other important information. You’ll need to hold on to the ticket so you can reclaim your items after you’ve finished paying off your loan.
If you’re unable to repay your loan in full, your collateral items will now belong to the pawn shop.
Pawn Shop Loan Requirements
While you don’t need to have a perfect credit score to obtain a pawn loan, there are typically a few requirements. You’ll need to provide:
- Valuable item to be used as collateral
- Valid ID
- Your contact information
It’s as simple as that!
The Bottom Line
If you need a quick and easy loan that won’t negatively impact your credit score, a pawn lawn may be right for you. To learn more, call Maxferd today at (880) 888-PAWN (7296). We have locations in San Francisco, Beverly Hills, Woodland Hills, Van Nuys, and Lawndale. We hope to see you soon!