Understanding Your Loan Options
According to a 2016 survey, sixty-nine percent of Americans have less than a thousand dollars in savings. When you’re young and carefree, a thousand bucks sounds like a good amount of cash to have on hand, but when you’ve got a household to manage, monthly bills to pay, and kids to feed, minor financial emergencies can cause major financial headaches.
We’ve all been there. It’s a week until pay day, you’re already running low on cash, and you get a flat tire in the middle of nowhere. Suddenly, what little cash you’ve got saved away is spent on towing and service charges. Yet, you’ve still got to get to work; life doesn’t grind to a halt just because you’re broke.
When you need a quick infusion of cash to deal with life’s unexpected issues, there are a few options for loans that are available to most people. Advertisements for payday loans, fast cash pawn shop loans, and personal loans from banking institutions are everywhere, but it’s important to understand the differences in order to avoid making a bad call and ending up worse off.
Not All Loans Are Created Equal
One of the most commonly advertised types of short term loans is the payday loan. You see these ads on bus benches, billboards, neon storefront signs, and local TV; these types of loan stores are everywhere, especially in big cities, and they really stretch to make their services seem like a great idea.
The problem with these kinds of loans is the punishing interest rates, which are applied over very short terms and designed to trip you up and keep you in debt to the lender.
Most payday loans are exactly what they say – a short-term loan designed to float you until your next paycheck comes in – usually no more than fourteen days. The interest rates on these loans are always intense, often over four hundred percent APR. Even if you’re able to pay them back in time, you end up spending a lot of money to borrow a little.
Personal loans from the bank aren’t much better. Though you can borrow more money through a bank or lending institution than you can from a payday loan store, personal cash loans aren’t as friendly as they sound. They are tied directly to your credit score and are often a lot harder to get, with more paperwork and potentially greater long-term risk.
While they may seem like a good idea in the moment of need, payday loans and personal loans often leave you in a worse position than when you started, and you end up owing more than the amount you needed to borrow in the first place.
The best option, when you need quick cash, may be to head to the nearest pawn shop.
How Pawn Shops Work
There are a few different ways that a pawn shop can help you get cash in your hand when you need it most. GEM Pawnbrokers has twenty-six locations in Manhattan, Brooklyn, Queens, Bronx, Westchester, and Long Island, and the stores are set up to make it as easy as possible to walk out with the cash loan that you need.
Pawnbrokers work on collateral. In order to get a pawn loan, all you need to do is come into the shop with something of value (your collateral) and a valid form of ID. Collateral can be anything that is worth money. Gold, silver, jewelry, diamonds, electronics, musical instruments – even your car can qualify as collateral for a pawn loan.
Once the collateral value of your item or items has been established, you walk out of the shop with cash in hand. GEM Pawnbrokers offers quick cash loans as high as a million dollars if you’ve got the right collateral. You don’t need to worry about getting a bad deal, as GEM has been in the business for nearly seventy years and has trained pawn specialists on hand to give you the most money possible for your collateral.
One of the best things about pawn loans in New York is the interest rate. New York pawn clients have access to interest rates as low as four percent, while other states charge as much as ten to twenty-five percent per month for the same type of loans.
When you take out a payday loan or a personal cash loan, the interest rates are going to be much higher and are designed to keep you on the hook. If you can’t pay the full amount of your loan at the end of the short loan period, interest is continually added and will usually double the amount you owe within a matter of weeks.
With a pawn shop loan, you’ve got options. First of all, the loan period and payback times are flexible, rather than a legally set amount of time like a payday loan, which only goes until your next paycheck. At the end of your loan term, you can pay off the interest and extend the loan or pay back the total amount of the loan plus interest and get your property back. Pawn shop loans are there to help you get quick cash without putting you any deeper in debt.
Keep Your Credit Score Safe
When you default on a payday loan or a personal cash loan from a lending institution, your failure to pay has a direct and immediate negative impact on your credit score. It doesn’t work the other way around; you can’t build good credit with a payday loan, but you can certainly mess up any good credit you might have. This is yet another reason to avoid payday and personal cash loans – no matter how much you need that cash, it can easily come back to bite you.
In the United States, your credit score is important for making any type of big purchase. If you want to buy a house, lease a car, or start a business, good credit is an absolute must. Even most personal loans from the bank require a certain level of good credit to even be considered.
Pawn loans have no impact whatsoever on your credit score, even if you can’t pay. Worst case scenario, the item put up for collateral simply becomes the property of the pawn shop, and they will put the item up for sale in order to recoup the cost of your loan. This alleviates the need for any credit involvement, as the shop is protected against nonpayment by the items you put up for collateral.
Better Than Overdraft Fees
One of the major ways that banks make money off their customers is through overdraft fees. If you aren’t careful, and accidently spend more money than you have available in your debit account, you may be on the hook for fees ranging from twenty to forty dollars per overdraft transaction. Some banks even charge a daily fee for having a negative balance in your account.
In situations like these, a quick visit to a can save you a lot of money. Most banks don’t apply fees until the next business day, so, if you accidentally overdraft your account and want to avoid daily fees, it’s as simple as getting a small pawn loan to cover your overdraft, then reclaiming your property when you get paid.
Even with interest rates in play, the amount you end up paying for your pawn loan will almost always be less than you’d pay racking up overage fees every day until that check comes in. There’s nothing worse than having a check deposit into your bank account, only to have most or all of it eaten up by overdraft fees right away!
When you look at the facts, it becomes clear that pawn loans are usually a much better option than other types of quick cash loans. They aren’t punitive, they don’t involve your credit score in any way, and the terms are more flexible than payday loans and personal loans. All you need is collateral and valid ID to stay afloat.