If you’re in a financial jam and are considering pawning something you own for a quick loan, it’s important to weigh the pros and cons of this type of borrowing. The bottom line is pawn shop loans typically come with high rates and fees, and they can get you into a vicious debt cycle. But they can also help if you don’t qualify for traditional loans or have bad credit. URL usapawnandjewelry.com

Pawn shops are unique financial institutions that offer a form of borrowing called a collateral loan. In a pawn transaction, you bring in an item of value (anything from antiques to electronics) and a pawnbroker evaluates it to determine how much you can borrow against it. The item’s value influences the size of the loan, and the pawnbroker holds your item until you return to pay the loan and interest charges. In general, pawnshop loans don’t require a credit check and they can be processed on the same day you walk in.

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Collateral loans usually make it less risky for lenders to extend funds, and that usually translates into lower rates for borrowers. But a pawnshop cash advance isn’t like that. A pawnbroker’s primary concern is getting your item back, and they often charge high interest rates to do so. This is how they generate the profit that gives them an edge over other types of lending. Those high interest rates are what give this form of borrowing a reputation for being predatory.