There comes a time in many people’s lives where they may have to seek out a loan or another similar source of money to avoid financial troubles. However, the payday loan is one of the most common short-term loans and is usually a mistake. Here’s why a pawn loan might be a better idea for those who need quick money on a short-term loan situation.
The Dangers Of Payday Loans
Payday loans are a prevalent type of short-term loan that many government officials warn against pursuing. While they are legal to offer and accept, a payday loan puts a heavy onus on the borrower and often creates a challenging cycle that may be hard for them to escape. Just a few problems that you may experience if you take out a payday loan include:
- High-interest rates that make your payments surprisingly hard to make
- Quick repayment cycle that may be as soon as your next pay period
- Questionable and even usurious repayment rates
- Potentially questionable people offering these types of loans
These negatives make it better to stay away from payday loans and find a different kind of compensation that suits your needs. That said, you may also need to find a quick form of money that can help you pay medical bills or other financial demands. In this situation, you must consider pawn loans and how they can help you out in challenging situations.
Pawn Loans May Be A Better Option
Pawn loans come from pawn shops that are willing to take items off of your hands and give you a loan for them. This money must be paid back at a particular time (decided by you and the shop).
If you do not make your payments on the loan, you lose your items. And while this fact may frustrate some, pawn loans are still better than payday loans for the following simple reasons:
- More Reasonable Interest Rates: The interest rates on pawn loans are much lower than a payday loan and among the lowest for similar short-term loan options. As a result, you won’t pay nearly as much on each payment.
- Fairer Repayment Cycles: Pawn loans last longer in their repayment cycles than payday loans, helping to minimize potential issues, such as falling behind on your payment.
- Real Reward for Repayment: When you repay a payday loan, you simply get out of debt. But if you repay your pawn loan, you get your item back. You can then sell it if you want or pay it again for more money.
As you can see, a pawn loan is usually a better choice than a payday loan for most people. However, it is still essential to understand that you need to stay on top of your payments. When you lose your items in a pawn shop by not paying your fees, the shop will sell them at a higher price to profit. But they will dutifully hold onto it and give it back to you if you do make all your payments.
Finding Money For Your Needs
If you think that a pawn loan is an excellent option for you, there are many options that you can consider for this monetary source. Some may find that companies like Monte de Piedad provide the best choice for their needs. Others may seek out different pawn shops to sell many of their goods to cut out the loan idea. Whatever option you like, make sure you feel comfortable getting rid of your items, even if temporarily.