Did you know that you might be able to take out a loan from your local pawnshop? If you’ve been put off by the idea of using an online company and you’d rather sort it out in person, a pawnshop loan could be a great solution. In this guide, we’ll outline some of the main advantages of choosing a pawnshop loan over using an alternative credit solution.
Perhaps the biggest benefit of getting a pawn loan is the efficiency. While bank loans might take weeks to process, you’ll be able to get a pawnshop loan very quickly, making them ideal for dealing with urgent financial situations. You’ll pay a collateral – a type of bond, or security deposit – to the lender, and between you and the pawn brokers, the total loan amount should be decided quickly.
No credit checks
Since pawnbroking revolves around exchanging goods, almost all pawnshops have a no-credit policy, making them an attractive option for people with a poor credit score. A pawnbroker will never be concerned about your credit score, and you won’t need to disclose any information about it either. However, this does mean that pawnshop loans are generally smaller sums of money.
No credit score impact
Since pawnshop loans aren’t associated with credit, if you do opt to take one out, it won’t affect your credit score. With banks and building societies, however, any slightly late repayment could potentially have catastrophic effects on your credit score. In turn, this performance would jeopardise your ability to take out a loan in the future. It’s more sensible, therefore, to take out a pawnshop loan for smaller amounts.
Repayment terms will be clear from the moment you sign the paperwork at the pawnshop, and no pawn broker will lend to you if they’re not confident that you can repay the loan. Plus, it’s up to you how you choose to repay it. For instance, you could repay in smaller, regular instalments, or in one lump sum by the deadline date. Alongside offering shorter loan terms, pawnshop loans help you to keep track of what you owe.
Being careful with credit
As with any type of loan, it’s important not to rush into any big decisions or take out a large sum if you don’t think you’ll be able to afford the repayments – even though it might be tempting to take out more than one loan at a time.
If you’ve been refused a pawnshop loan, don’t be disheartened: there are still plenty of other ways to raise funds and get help with your bills. To learn more about how you might be able to improve your credit score, it could be worth reading detailed credit guidance from Citizens Advice.