Do Pawn Loans Affect Credit?

Do Pawn Loans Affect Credit?

When you are in a pinch and need cash quick, you have a few options. You could always sell some items to a friend or family member, try and get a loan from someone you know, apply through a bank, or work with a pawn shop. One reason people might worry about taking out loans is because of how it could affect them in the future. For example, missing any payments on a credit card or on a loan from a bank will affect your credit score. But what about pawn loans? Do loans from pawn shops affect your credit? No. Unlike working through a bank, working with a pawn shop will not impact your credit score in any way. In this article, we will discuss the pros and cons of working with pawn shops. 

Pros Of Getting A Loan From A Pawn Shop

Pawn shops might be your best option if you cannot take out a traditional loan due to your existing credit score or because you are worried about how it may affect your score going forward. Banks can be tricky, and taking out a loan with a bank can affect any future loans and interest rates for the rest of your life. Here are a few reasons you might want to work with a pawn shop: 

  • No Bank Account: If you don’t have a bank account, getting a loan might be difficult and it might be a long process. A pawn shop provides loans quickly and without the need for credit checks.
  • Bad Credit: If you have a bad credit score, that won’t affect how much you get for your item or the loan payments. Unlike banks, pawn shops only take the collateral into account when deciding how much to lend to you.
  • Debt Collectors: Failing to pay a loan from a bank can lead to being hassled relentlessly by debt collectors. Banks sometimes sell the debt to collectors who can bother you endlessly. With pawn shops, the result of not paying a loan is not getting back the item you pawned.

Cons of Getting A Loan From a Pawn Shop

One of the first places to advertise the resale of products are online marketplaces that act as a middleman between buyers and sellers. The unfortunate side effect of this is that there isn’t always a lot of oversight. Many online marketplaces that act as intermediaries between local buyers and sellers don’t have to claim any responsibility for listing accuracy. There is more than a couple of stories of people being upset about being overcharged for a product that looked good online but ended up being broken. And the process of reporting a seller and getting a refund can be difficult and time-consuming. Generally speaking, when buying directly from a local seller it is always best to know that person personally so you know you can trust them. Going through social media marketplaces or other online marketplaces can have a high-risk value. Even if the tool is in good condition you might be overcharged by someone who is banking on the fact that you have not looked into any other options. 

  • Loan Amount: Your loan amount is determined by the value of the items that you are putting up as collateral for the loan. Loans are often offered for a fraction of what you would get for selling the item directly to the pawn shop because you are using it to get a loan and are planning to get the item back.
  • Choosing The Right Item: While many pawn shops will work with you to provide extensions or find payment timelines that work for your timeline, one of the dangers of pawning an item is you could lose the item. It is always recommended that you are
    careful in choosing what to pawn and knowledge of what your plan is to pay back the loan.

Learn More About Pawn Loans in NYC

If you live or commute in and out of the NYC area, we would be happy to help you with pawn loans. Paradise Pawn has two locations in the Bronx that serve people throughout NYC area. Visit us in person, give us a call, or contact us for more information.