Pawnshop vs Payday Loan


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Life doesn’t always go as planned; things tend to happen when you least expect them to. For instance, your geyser could spring a leak and damage your ceiling or your car could breakdown and require fixing. These are things you may have not budgeted for which means, you won’t have the money to fix the problems. It’s not unforeseen catastrophes that can throw you off but the cost of living has been going up but your paycheck has not caught up to it. If you find yourself in a jam and you can make that paycheck stretch over the entire month there should be something you can do.

You can take out a loan, however, conventional loans from your bank or other financial institutions are hard to secure especially when you have bad credit. What you should be looking for is a way to get the money you need without having to go through credit unions but also finding a loan with interest rates that are reasonable. Let’s look at two options that have become popular for a lot of people: pawn loans and payday loans. 

What is a pawn loan?

Brisbane Pawnbrokers offer customers a way to get quick cash by using their valuables as collateral. Common items that get pawned include jewellery, power tools and electronics. The loan amount will based on the value of the item you pawn. With a pawn loan you can redeem your valuables when you pay the loan back in full. The repayment of a pawn loan is usually over 30 days to 3 months. 

Payday loans are actually short-term loans. They are small dollar amounts. The average pawn shop loan is between $75 and $200. You can apply for a loan from a brick and mortar business but a lot of pay day loan lenders operate online. In-store applications are paid out immediately. Payday loans offer more than pawnshop loans. The average amount is $500 and you don’t need collateral to secure a payday loan, just your ID and payslip. 

When you apply for a payday loan online, you can expect payment within a few minutes or 24 hours. To apply for a payday loan, you need to demonstrate that you are actually employed or receive income as a guarantee that you have the means to pay the loan back. Payday loans are available for anyone even if you have bad credit. The risk with payday loans is that failure to repay the loan could result in a bad credit report. Compared to pawn loans payday loans have higher fees and higher interest rates than pawn loans. 

When it comes to the annual percentage rates (APR) for both types of loans, payday loans have an average APR of 300-400%. Brisbane Pawnbrokers on the other hand do not have annual rates, instead their rates are quoted on monthly basis. The average would be 10% interest per month which translates to an APR of 120 %. Pawnshop loans generally have a lower APR than payday loans. 

A lot of people can find themselves in a cycle of debt as borrowers often need to take out another loan because they couldn’t pay the first one in time. Rolling your debt over and over will only ensnare you in more debt.

Bottom line: Which option should you pick?

Loans from Brisbane Pawnbrokers and payday loans are short-term loans that don’t have stringent requirements and they are ideal options in a financial crisis. When choosing between the two weigh the interest rates a as well as the risks they have. If you have something of value and you are looking for quick cash then a pawnshop loan is ideal as it has a lower interest rate.

Brisbane Pawnbrokers can simply sell your valuables if you fail to pay on time. Payday lenders on the other hand will allow you to roll over your debt to give yourself more time. This of course means you have to pay back more money than you would have. Payday lenders might not require a good credit record when they are giving out loans but they can report you to credit bureaus for being a delinquent payer thus ruining your credit record even more. When all is said and done pawn shop loans seen to be a better alternative to payday loans.