What is the Difference between a Payday Loan & a Pawn Loan?

Are you looking for a loan for getting through your financial crisis? If yes, then you should evaluate the popular options and make an informed decision. While going through the optimal solutions for loans, you will find payday loans and pawn loans better than others will. Going through this article, you will find some amazing factors to make a better decision between both of these options.

Payday Loans

When getting a payday loan, you have to undergo an extensive process and pay high interest on your returns. The loan-providing company offers the loan against a post-dated check.  In addition, you need to submit a significant amount of private information to prove your reliability and potential to return the money.

The information that the loan company requires includes your bank statement, proof of permanent residence, and pay stubs. The deadline and the amount depending on your current earnings and the duration in which you will return the loan.

Pawn Loans

You can receive pawn loans against collateral. Tools, jewelry, musical instruments, and electronics will help you get the loan without extensive requirements. The money you will receive depends on the value of the item.

Since the pawnshop is holding your item as collateral, you do not have to go through a detailed approval system or share too much information. Lenders might not even ask for credit history for loan approval. Once you repay the loan, you will get your item back. Be sure that you return the loan before the pre-determined time period. If you fail to do so, the pawnshop will keep your item up for sale.

Different Between a Payday Loan and a Pawn Loan

Payday and pawn loans are completely different methods for getting a loan. It would be best to determine the safer and optimal solution for satisfying your loan needs:

Credit Score

When you have a payday loan, you need to ensure that your checking account has a sufficient amount before the due date. If the loan company finds that your account does not have enough money, they will mark your loan as default. Furthermore, you have to pay overdraft charges to the bank if you are unable to pay any installment. The loan-collecting agency will also report to major credit reporting agencies, which harms your score. A bad credit score will influence your future employment, housing, and loan approvals.

In contrast, you will not be sharing your employment, banking, and credit information with the pawn stores. Therefore, these loans do not affect your credit scores. The requirement to receive this loan depends on the item used as collateral. So, if you fail to pay the loan on time, the store will sell your items to recover the loan money.

Interest Rates

The reason many people hesitate to choose payday loans is because of high-interest rates. Sometimes, these loans become a trap and you will end up paying plenty of money month by month while your actual loan amount sits unaffected. As a result, you will stick with your loan for years.

However, pawnshops are different as they follow the standards of the state. This means that the state government regulates the interest rates, so it does not become a burden for the borrowers. If you compare the interest rate of the payday loan and the pawnshop loan, you will find a significant difference. Therefore, if you want an easier solution to handle your financial crisis, pawn loans would be the way to go.

Conclusion

The decision between choosing a payday loan and a pawn loan is all yours. You need to evaluate the terms and conditions for both options to decide what would be most suitable for you. Both options have pros and cons that you need to know to make a well-informed decision.

A payday loan is suitable for people seeking large cash loans. However, if you want to borrow money under $1000, you should go with a pawnshop.as they are the safer option. However, you need to be careful while choosing the item as collateral.

It’s Quick & Easy to Get the Cash You need With a Pawn Loan!

A secured loan from a pawn shop is not only convenient but you do not have to wait for an extensive loan approval process to complete. Because pawn shops are not concerned about credit ratings. Moreover, you will not receive any calls from debt collectors about repayments.

For questions on items that we do or don’t accept please visit our “Accepted Items Page” for more information on a pawn loan please contact us today via our convenient contact form or by calling in directly at 1-800-375-PAWN