Do Pawn Loans Negatively Affect Your Credit Score?

November 14, 2022 12:00 am Published by Leave your thoughts

Pawn loans can help you in various situations if you need to obtain fast cash. In a nutshell, they are short-term advances that pawnbrokers give to people who agree to let them hold their goods. Here’s some information about such loans and how they might affect you if you obtain one:

What Are the Advantages of Pawn Loans?

There are many advantages to taking a pawn loan from a reliable provider. One advantage is that you can come back and get your items if you don’t want to sell them to the pawnbroker. You will have 30 to 60 days to return to the shop and pay the loan and interest.

Thus, you don’t have to lose your most precious items if you don’t want to. Another benefit of pawn loans is that you can get them rather quickly. You should receive an offer within one hour if you take your items to the provider during operational hours.

Another benefit is that you will most likely receive cash from the pawnbroker. Therefore, you won’t have to take another step and go somewhere to cash a check. You’ll have immediate access to the funds to take care of whatever tasks you need to handle. 

What Are the Disadvantages of Pawn Loans?

There are a few disadvantages to getting pawn loans, unfortunately. One of the disadvantages is that you will only get a loan for a portion of the projected price of the object. For example, imagine taking a Playstation 5 to the pawnbroker, and it’s currently going for $700.

The pawnbroker will not offer you the full $700 for that item. He or she will likely provide you with 25% to 70% of that amount. It would be wise for you to do a little bit of investigating before you accept an offer from a pawnbroker. Some of them offer way more money than others do. Thus, you should compare at least three different facilities before you decide.

Another downside is that not all pawn shops take everything. They each have a specific list of what they will accept, and you can’t get any money from them unless you have those items. It’s in your best interest to call the prospective pawn shops and ask them what they take before you travel there to unload. 

Do Pawn Loans Affect Credit Score?

Pawn loans typically don’t affect your credit score. General pawnbrokers do not report your payments to the credit bureaus. However, they can report a non-payment to a creditor if they want to, but they usually don’t because the property you give the pawnbroker is like collateral.

That means they can choose to sell those items to other people if you do not repay them their funds. Therefore, they will have no reason to come after you to collect any money because they will get their loan back by selling the goods you forfeit when you default on the loan. 

You should have some insight and an excellent understanding of pawn loans at this time. Consider stopping by this type of establishment the next time you need quick cash for an emergency. 

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