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I remember years ago growing up when you needed some money fast and didn’t have any other alternatives such as credit cards, friends or a friendly bank you pawned something you had that was valuable. This was an easy way to get some money and technically you didn’t give away what you owned but you did have to pay a fee to get it back.
Every day I read headlines concerning payday loans that read- • City imposes moratorium on payday loan business, • Payday loan limits being considered and imposed, • Lawmakers seeking to impose payday loan interest cap rates. • Payday loan interest is high but it’s also legal • Supreme court to hear payday lending case
I though I would compare pawnshops to payday loans and see if it is really any different than the age old practice we all grew up with.
Pawnshops and pawn broking have been around for thousands of years the idea of bartering for goods and cash is nothing new. Basically when you pawn something you bring in something you own and give it to the pawnbroker as collateral for a loan. The pawnbroker then loans you the money against that collateral. This is really a subjective part but it’s usually pennies on the dollar. If you want your item back you repay the loan plus the interest and then get your item back. If you don’t repay the loan the pawnbroker keeps your item and sells it in their store usually for more of a profit.
So let’s take an example of this process and see how much we could expect to pay. Let’s take a common item like a piece of jewelry. We spent $200 for the piece of jewelry new a few years ago and want to pawn it to get some fast cash. The pawn shop is willing to give me $20 dollars for the item. In return for my item I get $20 and a ticket for the item indicating: • The item that I pawned • The amount of money the shop loaned to me for that item • The amount of money due in 30 days to get my item back if I choose
My ticket would tell me that for my piece of jewelry I received $20 and I need to pay $24.40 (that’s 2 percent interest plus 20 percent in fees). Within 30 days I can do one of the following: • I can return to the shop pay the fee and get my jewelry back • I can pay the monthly fee ($4.40) to extend my loan for another 30 days. • I can do nothing and give the pawnshop my property
$4.40 fees due in 30 days for a $20 dollar loan works out to about 264 percent per year. I won’t even go into the amount of info you have to give a pawnshop to protect the merchant from handling possible stolen goods. Let’s just say it’s not anonymous and leave it at that
Is any of this sounding familiar?
Payday loans work in the same manner. If you need fast cash and have a job and are over 18 years old you basically can get a payday loan. There are scores of payday loan stores in most major metropolitan cities and you can also get a loan over the internet without ever leaving your home
Most services are all automated and give you an answer within 2 minutes. Typically payday loans firms offer the following
• Up to $1500 deposited into your account within 24 hours • Flexible payment options • $30 per $100 finance charge • 100% faxless • Bad Credit ok
While typically these loans are high interest think about the alternative, it is a set rate with no haggling over the value of merchandise you may or may not what to give up. By examining the facts and reading comparisons of the different loan types available you can quickly and easy qualify for a quick and easy loan. Both payday loans and pawnshops have there place within society and serve a need with a few facts and help both can be utilized at different times to help during a time of need
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