If you are in need of quick cash, is it better to opt for an on-line payday loan or visit your local pawn shop or cash advance lender? Well, if privacy is your main concern, you may prefer to use an on-line lender. This might also be true if you need to apply for cash at an odd time or do not have a vehicle to easily get to a brick and mortar pawn shop. Moreover, you must have items of some value to pawn, and should be willing to risk losing these items if you are unable to repay the loan. If these are not concerns, is one a better choice than another?
How does the pawn shop in town work? It is a bit simpler than you might expect if you have never visited one. You bring items in, including jewelry, musical instruments, tools or electronics. You are offered a cash amount for the item. Within 30 days, you must pay back that cash amount, plus interest. The pawnbroker typically offers approximately 10% of the item’s actual value. The amount of interest varies, and some pawn shops may offer a lower rate if it is the first time you have pawned anything with them. The typical pawn shop interest rate is around 240% annually. Thus, if you have pawned something for $100, you will likely pay somewhere around $120 to reclaim your item. You may find that in some areas a more competitive environment exists, allowing you to find a lower interest rate if you shop around. Alternatively, you can leave the item with the pawnbroker and simply not pay back the loan. The item you have pawned exists as collateral to the loan and will be sold to another buyer. You may also be able to pay the interest and continue the loan at the end of that 30 day period. You do not need to be employed or have a bank account to use the services of a pawn shop.
Local payday lenders have about the same requirements as online lenders. You will need proof of employment, bank accounts and other personal information. Your average payday loan comes with a $15 to $20 fee per $100 borrowed. Typically, the turnaround time on a loan like this is 14 days. Interest rates on quick cash loans like these, whether borrowed on-line or in person are often from 391% to much higher amounts. In both on-line and local cash loans, the loan may be extended, but additional fees charged. This can quickly lead to a cycle of debt.
You could also consider a vehicle title loan, typically offered by the same lenders under similar terms. Most title loans are made in person, but there are some on-line companies offering these loans. In this case, your vehicle is collateral for the loan. Car title loans offered by local lending shops will typically charge interest in the range of 250% or even higher. Moreover, if you fail to repay the loan, you risk your paid for vehicle.
If all else fails, which is the best option? Frankly, if you have items you are willing to part with, try Craigslist or e-Bay first. Yes, you cannot get the item back, but you can get its full value. If that is not an option, pawn shops spare the risk of long term financial trouble due to a short term money crunch. Take the cash, try to recoup your item in 30 days. If you are unable to, simply let it go and you will not find yourself in a cycle of debt. In today’s rocky economy, it is no surprise that these services are more popular than ever, but can also cause far more problems than they solve.