Installment Loan vs. Pawn Shop - What’s the Best Choice for You?

If you’ve found yourself recently wondering how does a pawn shop work, you’re not alone. According to Forbes, nearly 30 million Americans use pawn shops every year. And they pawn everything from guns, tools, and vehicles to electronics, jewelry, collectibles, and antiques. While the idea of obtaining quick and creditless cash through a pawn shop may seem appealing at first glance, some potential pitfalls shouldn’t be ignored. Among them, lost items, small payouts, and confusing terms are some of the most common pitfalls that you should be aware of.

1. Pawn shops occasionally lose items

How does a pawn loan work? Pawn shops offer loans based on collateral. You bring them something that you value, and they give you a short-term loan for it. They hold on to this item until you repay your loan, plus any additional fees. The deadline for repaying the balance on a pawned item averages one to four months.

This may seem like a fair amount of time, but what is 30 days when you’re in a sticky situation financially? And if you can’t repay your loan in the agreed-upon timeframe, you won’t get your item back. Additionally, pawn shops handle so many different items each year that it’s inevitable for some of them to get lost or stolen. Thus, it is important to look at the fine print on your pawn shop contract to determine how you will be reimbursed for potential lost or stolen items.

At Spotloan, our short-term installment loans require no collateral, have no hidden fees, and can be paid back up to ten months after the paperwork is signed.

2. Pawned items don’t always get you the amount of money you need

When you pawn something, the loan amount will likely only cover a small portion of your item’s actual value. To obtain the amount you need, you may have to pawn several different items or find other ways to make up the balance.

On the other hand, installment loans like a Spotloan make it easy to get the money you need all at once and make convenient payments based on how you are paid - weekly, bi-weekly, every two weeks, or monthly. A Spotloan is a loan on your terms. And depending on the time of day that you’re approved and you sign the loan agreement, you may receive a same-day deposit, too.

3. Some pawn shops have confusing loan terms

Pawn shops don’t have clear-cut interest rates, and the rules regarding their fees can vary widely depending on your location. They also typically add in service charges and other sneaky fees that they may not be fully transparent about. When you return to repay your loan, you may be in for a surprise.

At Spotloan, we don’t sneak any extra fees into your loan. We give clear-cut and transparent answers, terms, rates, and fees up front, so you’re not caught off guard later. Plus, we never charge prepayment penalties for those who find themselves catching up faster than they anticipated. If you find yourself prepared to repay your loan early, we encourage you to do so.

4. Some pawn shops are better than others

While there are plenty of pawn shops that appear reputable, there are probably just as many with bad reputations. The small loan amounts, high fees, and potential to lose your belongings make for an unappealing cost-to-benefit ratio. When you add in the fact that some pawnbrokers operate illegally, it becomes abundantly clear that there are better alternatives.

Avoid the hassle of waiting in line in at a pawn shop just to have a stranger potentially undervalue your prized possessions. You can apply for a Spotloan quickly and easily from the comfort of your couch. And checking your rate won’t affect your credit score, so there’s no downside.

Take the time to consider your terms, options, rates, and other details rather than rushing into something that you may not be happy with later. Spotloans come with peace of mind and full transparency. However, Spotloans are an expensive form of credit and are intended only for short-term financial needs. Spotloans are designed to help you deal with emergencies such as rent, medical bills, car repairs, and expenses related to your job. Spotloans are not intended to solve longer-term credit or other financial needs, and alternative forms of credit may be better for you, including borrowing from a friend or relative, using a credit card cash advance, taking out a personal loan, or using a home equity loan or savings.

Feel free to contact our customer service team by email at [email protected] or by phone at 888-681-6811 to discuss if a Spotloan is right for you.