Pawn shops are a good option if you are in need of money that you are unable to obtain from traditional sources like banks. It is useful to know how these businesses operate before selling or buying from a pawn shop. Here are four things to know before you visit your local title pawn Georgia shop.
1. How Pawn Shops Work
Pawn shops offer quick loans to individuals, using the item that is being pawned off as collateral for the loan. The pawnbroker will look at the estimated value of your item, and the actual monetary amount of your loan will be less than the value of the item. Commonly pawned property include musical instruments, electronics, sports memorabilia, appliances and jewelry. The pawn shop will keep the item until the customer pays back the loan under the terms and conditions stated by the shop.
2. Interest Rates
Interest rates from pawned items are highly dependent on a number of factors, including the state where you reside and the original value of the item you bring into the shop. Average interest rates can vary between 5% and 25% per month.
3. Personal Requirements
Usually, the only requirement needed to receive a loan from a pawn shop other than the item itself is a valid government ID such as a state driver’s license or U.S. passport. These requirements often make pawn shops a quicker and more accessible option than a loan from other types of lenders that ask for further verification like bank account information or a co-signer. Keep in mind that property that is old or difficult to store might not be accepted.
4. Credit Scores
The good news is that if you do end up defaulting on the loan from your pawned item, it will not alter your credit score as the loan was a result of property, referred to as collateral. In addition, a loan from a pawn shop does not involve a credit check, which is another way that a credit score can be negatively affected. Pawns are known as non-recourse debt, meaning the property can be seized by the issuer of the loan, but once this happens the borrower is not responsible for any more repayments of the loan.
Pawn shops can be a good resource for people in need of a small amount of money quickly and easily. However, make sure you know these four rules and regulations when considering this option.