The advantages and disadvantages of pawnshops

A loan in exchange for a piece of clothing or jewelry can provide you with that quick money you need. However, there are certain advantages and disadvantages of pawnshops that you should consider before going to leave an item of value there.

There are many pawnshops that you can easily turn to. Payday loan consolidation via is a very simple process. Before going to one you should investigate which is the pawnshop that suits you best.

You attend one of the many places that exist in the country and leave some valuable item for a specific time, months or days, in exchange for a specific amount of money established by the store. They set deadlines, interest, and penalties, and you get an amount of cash.

You can use this money for whatever you want, but you have to make sure you pay back the money borrowed and the interest generated so you can recover what you leave behind.

If you do not fulfill your part of the deal, after a while your valuables become the pawnshop and you can put them up for sale. Of course, you can buy your stuff once you pay what you owe, but it is likely that you will have to pay much more than you initially received.

The loans offered by these pawnshops can be very useful, but they also have some negative consequences. In a nutshell, they have some pros and cons. These are some of the advantages and disadvantages of a pawn shop loan.


One of the biggest advantages of this type of loan is that it is easy. You will simply have to take something that can be used as collateral and complete some documents. The pawn shop will give you a receipt that has the terms of the loan.

There are many people who know the advantages that come from pawn shops and use the services they offer. These houses do not complete any credit checks, so it is easy to obtain a loan.

This is due to the fact that you only have to leave a valuable item with them as collateral. In this sense, this type of loan is completely insured by the guarantee that you provide to the pawnshop.

Therefore, the lender is not really worried about whether you default on the loan or not. If you do so, you can simply keep your collateral and sell it.

Another advantage of using this type of loan is that you can get cash immediately. You do not have to wait for them to obtain the money or process the documents of a loan. They will simply give you the money you need instantly, as long as your items have real value.

With this type of loan, if you can not make payments on time, you will not affect your credit history permanently. They will simply store your merchandise, but nothing will be reported to the credit bureaus.

The best thing about these loans is that they are fast. In most cases, you can get the money you need the day you sign the contract. In addition, the interest charged by the pawnshops will be only for the period in which you have actually borrowed the money.

With many other loan services you can not pay off the loan quickly or you have to pay an additional fee to do so. This is not something you confront with pawnshops.


One of the disadvantages of obtaining a loan with a pawnshop is that the term of the loan is usually very short. In most cases, you will only have 30 days to repay the loan.

If necessary, you can usually get an extension as long as you continue paying interest on the loan. While you can extend a loan, this is a very expensive proposal.

Another problem with these loans is that interest rates are going to be very high. In some cases, you will have to pay an annual percentage rate of up to 300 times what they lent you. Therefore, you should use this type of loan only if you desperately need the money.

This interest rate makes it very difficult to justify the use of a pawnshop as a lender. When you get this type of loan, you must provide an object of value that will guarantee the total amount of the loan.

The only problem with this is that the pawn shop’s evaluation is usually very low. In other words, people do not know that generally, they can only borrow a percentage of the value of the item they are pledging.

This means that you must have a very high-value item or several items of small value to obtain large amounts of cash. Sometimes, the amount to which the guarantee is valued is available for negotiation, but this is not always the case.

Actually, it is unlikely that you will get what you want for the value item you are trying, the valuation is down. Another disadvantage you should know is that the pawnshop can sell your valuable item if you can not repay the loan on time.

Of course, they should warn you that this is what they are going to do, but often it does not happen. If the item is not sold at a price that covers the remaining amount of the loan, then you are still responsible for this.

The last scam you should know is the fact that your item could be sold for less than it is worth or less than what you would get elsewhere. This means that in the end, you could get fewer benefits from the agreement that you get with a pawnshop.

If you need more money than your salary offers, we recommend you take a look at our “Guide to earn extra money from your home”.

In the Credifiel blog, you will find more tips on personal finance that will help you create a financial culture that shields you from economic crises.

You will find many ideas that will serve you, from selling the objects that you have at home and do not use until you start a home business of your own. You can download this material at no cost.