When we first found out that pawn shop payday loans were the new thing we scratched our heads and had to ask ourselves why the pawn shops were going into the payday loan business.
When we started running the numbers we were stunned!
It made complete sense that they would choose this type of service to offer considering the huge profits involved in these loans.
Since the pawn shops will be offering both types of loans his article will explore them and how they stack up against each other, which is better and why.
Let’s start with payday loans!
Need Help With payday Loan Debt?
A payday loan is a loan where you borrow money against your next payday.
All you need to take one out is proof of $800.00 or more monthly income and a checking or savings account.
Having bad or no credit is fine, as long as you meet the income and have that bank account you will be given the loan.
You can get these loans at stand-alone storefronts and now some pawn shops or there are countless online payday loan companies.
Be care when using the online companies!
while you can get same day cash within 2 hours in most cases they are set up completely different than store-front payday loans. You can learn more about them here.
How they work is they charge you a counter fee and a set amount of interest for the loan, and this loan will come due on your next paycheck.
The fee for a $500.00 two week loan is $150.00!
While this is extremely high interest the money is there and available for emergencies and when the loan comes due it will be paid in full and over with.
Pitfalls Of Payday Loans
The downside besides the high interest is these companies make it way to easy to get caught in the payday loan trap.
They allow clients to “roll over” their loans.
In other words, they allow the client to just pay the counter free and the interest and extend the loan to their next payday, thus adding a new counter fee and interest charge to the original balance.
This can lead to getting caught in the payday loan trap.
Pawn Shop Loans
Pawn shop loans are completely different than payday loans.When you take out a pawn shop loan you as basically borrowing money on something you own like a lawnmower, ring, china, etc…. which is called pawning an item.
The unwritten rule is they will borrow you half of the resale value of the item or items you are pawning.
How it works is you borrow the money and leave the item at the pawn shop and get a pawn ticket for said item.
The loans are 30 days and to get your item back you must pay the loan back plus any interest owed.
The interest is pro-rated by the day so you are free to let the item sit for 30 days or pick it up in as soon as a day or anytime in between and the interest will be figured out at that time.
The rates are not bad and figure out to be about $15.00 per $100.00 borrowed.
If you do not pick up the item withing the 30 days the store will keep the item and you will owe nothing.
You may also extend pawn store loans and you must be very careful not to abuse this feature as it could cost you considerable amounts of money, many times exceeding the value of the items pawned.
When a person needs money in an emergency and can not get it anyplace else a payday loan can make sense.
Payday loans are safe to use if you follow these three simple rules!
- Borrow ONLY what you can afford to pay back on the 1st due date
- PAY OFF the loan on the first due date
- NEVER extend a payday loan
You will be paying a large one-time interest rate and if that is understood and you are OK with that, you could safely take out a payday loan.
A pawn store loan is a safe and easy to get money in an emergency for people who need it and can not get it anyplace else as long as you follow these simple rules:
- Only pawn what you could afford to pay back in 30 days
- Never extend a pawn shop loan
If you follow these two rules you will be fine!
You will also have the option of just leaving your pawned item or items there and not have to even pay the loan back at all.
Take a close look around the house and maybe pick items you no longer need that have value!
There we have it, all the dirt on payday loans and pawn shop loans.
I hope this article helps you in making a healthy choice should you find yourself in need of getting cash by one of these methods.
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