How it works?
A pawn loan is a cash loan that is borrowed against an item of value which is used for collateral. It is a quick and easy way to borrow money without effecting your credit score.
What does that mean?
To acquire a pawn loan, you need to offer an item of value to the pawn shop. The pawn shop holds your item in storage with your name on it and gives you cash and a set of payment due dates.
If you pay off the loan (including interest) by the due date, you get your item back.
You may also pay the interest and extend the loan. The pawn shop will continue to hold your item, and you will owe more interest on the loan until you pay it off in full.
What does it cost?
The interest charged for pawn loans varies by state. It could range from 2-25% per month, or even more. When you visit a pawn shop near you, be sure to ask the pawnbroker what the state law is.
If you fail to pay off the loan (or if you decide not to pay off the loan), then the pawn shop has the right to sell your item to anyone. Losing your item can often be the most “expensive” cost of a pawn loan.
Is it safe?
Yes, generally. There can occasionally be pawn shops that try to swindle you in various ways, most pawn shops are licensed and have to follow a variety of rules to protect consumers.