Is There a Better Option Than the Nearby Pawn Shop?
The modern world sometimes presents very unexpected surprises, both good and not so good. And this means that you may need extra cash at any time. Not everyone has a financial safety cushion for a rainy day, and therefore, when money issues arise, one has to look for alternative ways to stay afloat.
So, you can borrow money from relatives and friends. But not everyone has the opportunity to lend you even a few hundred dollars. And then it remains to either take out a pawn loan or apply for a payday loan. Which of the options is better? We will try to find it out in our article.
How do pawn shop loans and payday lenders work?
Microfinance organizations and pawnshops work in completely different ways. So, applying for a payday loan is quite simple: a potential borrower applies to the lender online with a few basic documents that the company requires. As soon as you submit a preliminary application, the scoring system automatically determines the level of the client’s solvency. Most of the applications get approved. But there are situations when a microfinance organization declines a borrower’s request.
The indisputable advantage of payday loans is that you do not need to visit the lender’s office in order to apply for a loan or get the funds. The application can now even be submitted online, and the approved amount will be transferred to the bank account specified in the application.
Pawnshop employees must also receive a deposit from the client (in addition to the documents). This will be a kind of guarantee that the loan will be returned to the organization. And if this does not happen, then valuable property or paper will be sold, which will cover the costs and compensate for the funds issued to the client.
Jewelry, antiques, vehicles, stocks and other valuables can be used as collateral in a pawnshop. Their collateral value is determined by the appraiser, and it is within the specified amount that a loan is issued.
It turns out that applying for a payday loan can help you get $100-$1,000or even more, depending on your credit history and some other factors. But in a pawnshop, you will have to rely on a strictly limited amount, determined by the value of the pledge.
What’s the difference between payday loans and pawns?
There are some major differences between pawnshops and payday loan providers:
- An application for a payday loan can even be submitted via the Internet, while a pawnshop requires a direct visit by the client and the provision of collateral.
- The size of a payday loan is determined by the terms of the current program, that is, different lenders may offer the client different amounts. And in a pawnshop, the size of the loan will be strictly limited by the value of the collateral.
- Microfinance institutions make a lending decision within a few minutes. In order to find out the individual conditions at the pawnshop, you will have to wait for the verdict of the appraiser.
- Rates in pawnshops are always lower because the risks are also less due to the presence of collateral. But they can change under the influence of the market.
- Money in pawnshops is issued exclusively in cash, while payday loans can be obtained in a variety of ways, including by transfer to a bank account or an electronic wallet.
Pawn loans vs. payday loans: which is better?
The pawnshop does not check the credit histories of borrowers, and therefore, everyone has a chance to get money. But microfinance organizations are more reliable and their services can be used even in the absence of jewelry, antiques and expensive electronics. Moreover, today there are many payday lenders who are ready to issue bad credit loans online.
It turns out that a payday loan will help in a really difficult situation allowing you to solve financial problems the same day you apply. Therefore, you can find the right company for cooperation already now, the one that offers the most beneficial conditions:
Tags: finance, money, online loans, pawn shop, payday loans