Pawn Loans

Pawn loans also called safety net loans are used when customers need money quickly and are willing to use their valuables as collateral. Pawnbrokers focus on lending money secured by an item of value. Examples of items that people pawn are electronics and jewelry and can be almost anything of good value.  Lenders are not buying these items from clients, instead they are using the items as collateral if the client defaults.

Pawning dates back to 1450 in Perugia, Italy. They provided financial assistance which was secured by collateral which could be sold at a later date if the borrower were to default. Additionally, at this time there was no interest involved and instead borrowers were urged to make donations to Churches. This type of loan became a success and spread through Italy followed by other parts of Europe. Currently pawning is used around the world.

Pawn loans work by customers bringing their chosen item of value to a pawn shop and then the pawnbroker offering a loan which is based on a percentage of the value of the item. The pawnbroker keeps the item as collateral up until the customers pays off the amount borrowed, interest and any additional lender fees.  Generally, customers only receive a small portion of money compared to what the collateral is worth. This is because the pawnbroker has to consider security, storage, resale value and demand for the item. In Canada the average amount for a pawn loan is $150 however they greatly range based on the value of the item.

Examples of higher end pawn loan items include electronics, gold, tablets, smartphones, collectibles, quality musical instruments,  high end jewelry and even vehicles. However these are just examples of items that can be pawned. Lower end items such as household items, tools, lower end jewelry and many other items are able to be pawned.

Pawnshops interest rates are generally very high such as up to 25% per month. For example, on a $300 loan, your interest would be $75 a month. In Canada generally, pawn loans are a month long so customers do not have a lot of time to come up with the money they need to pay off the loan. One of the biggest worries of getting a pawn loan is that if you cannot pay the money back you will loose the item of value that is your collateral. Often people use valuables such as jewelry which has high personal value. If they default on the loan, there is no way to get the item back and additionally they only received a small portion of money compared to what it is worth.

With the current down turn in the economy, pawn loans are becoming more and more popular. Specifically a new crowd of white-collar clientele is turning to pawn shops to buy items and take out loans.  Pawn shops are also becoming more and more popular in smaller towns which are being hit by the economy the hardest. It is the most problematic when the major industry in a small town shuts down, leading to a major loss of jobs.

Instead of pawn loans many people decide to sell their valuables. This is because when entering into a pawn loan it is a high risk that you will not be able to get your item back unless you are positive that you will be able to come up with the money needed to pay off the loan. The down side to selling your valuables is obviously that they have sentimental value and often are irreplaceable.

Pawn loans are usually short term and have high interest rates. Additionally, pawn loans are generally for a small amount of cash and are unable to help people in a large financial emergency. For people looking for a larger dollar value in a loan, car equity loans are a much better option for them. Approve Loan Now offers loans up to $50,000 and loan terms up to 6 years. Another great thing is that you keep your car. This gives Canadians the financial freedom they need to cover any current expenses without stress.