Pros and Cons of Pawning Your Items for Money
There are a lot of places that will buy or pawn your used items. This is not a thrift store type place. At pawn shops you can sell your gold, electronics, guns, musical instruments and more. Now, you can either sell your gold and other things or you can pawn them. Pawning means you basically lend them to the pawn shop and they’ll pay you for ‘borrowing’ them but then at the end of the due date, you have to buy them back or you lose them. This may sound just fine when you’re in need of quick cash, but here are a few pros and cons before you go selling jewelry and everything else you own.
- Pawn shops can provide you with quick cash. Selling something on eBay or Craigslist or Offer Up depends on the buyers. They determine how much you get, will try and negotiate and you can’t guarantee that you are going to get the money when you want or need it. It can take a long time trying to sell like that. A pawn shop is much quicker. If they buy what you’re offering then you’ll be in and out of there within 20 minutes.
- It’s a very easy way to get a loan. Getting cash loans can be very difficult because they want to comb through your income, expenses, credit, etc. It’s a complicated process and few people qualify. However, selling something at a pawn job is much easier. As long as they take what you’re selling, you’ll get the money, no questions asked.
- It’s not going to hurt your credit. This is one of the biggest benefits. Although it’s usually a small loan, they aren’t going to check your credit or cause it to affect your credit at all. Even if you can’t or decide not to buy back your item, they’ll simply keep it and sell it. Nothing gets reported to the credit bureau.
- You will only get about a quarter of the retail price of your item. This is so that they can sell it at half the retail value and still make money off of it. For example, if you are trying to sell your gold or a guitar or something that usually retails about $100, you’ll only get $25 for it so they can resell it at $50 and still make a profit. This makes buying from a pawn shop a great deal but selling, not so much.
- The loan term is usually really short. Most places you get a loan from will give you a year to five years to pay it back, depending on how big the personal loan is. A pawn shop is typically gives you only about 30 to 90 days to buy back your item. If you don’t buy it back by that point, then they will turn around and sell it as part of their stock. Extensions are sometimes available but you’ll have to keep paying interest.
- Interest rates are extremely high. For some cases, the interest rate as it equates out annually, is almost 300%. That means that once you have paid everything off you will have paid about three times the amount that you got for it. The interest is set from the beginning as well so even if you pay it back early, you’ll still have to pay full interest. This is so that the pawn shop can still make a profit from your collateral even when you buy it back from them.
- Sometimes pawn shops will allow negotiations but more often than not, the price is what it is and there’s no changing that. You can try and bargain a bit to see if your collateral can be valued a little higher but it won’t always take.
So before you head out to sell your gold because you think it’s going to be an easy way to get a great deal, this again. This is really only something that you want to do if you are in dire straits and really are in need of the money. Even then, try and see if there are other avenues that you can go through in order to be able to keep more of your own money.
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