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What To Know When You Use A Pawn Shop To Get The Cash You Need

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Are you in a situation where you need cash right now but you don't have it on hand? If so, you may have to go to a pawn shop to get some cash for selling some of your stuff. Here are some questions about using a pawn shop in this financial situation.

How Do Pawn Shops Work?

You may be wondering how pawn shops even work, which is why it helps to have an overview of the process. You will bring in an item that has a high value that you want to pawn, such as jewelry or a high-value collectible item. The pawn shop then determines how much the item is worth in terms of resale value and makes you an offer. 

The pawn shop will give you a percentage of the value of the item in exchange for cash right away. Consider this your loan, with the item you pawned being used as collateral. The pawn shop then agrees to hold onto the item for a specific amount of time, during which you have the ability to pay back the loan and an additional small fee to get your item back.

Why Not Go To A Bank For A Loan?

While it may seem like it would be a better decision to go to a bank to get a loan, be aware that banks often have minimum loan requirements and origination fees in order to get a loan. It can also take a while to be approved for the loan, which can be problematic if you need the money right away. If you only need a small amount of cash and can't wait long, then a pawn shop will be a quick and convenient option for you. 

Can Your Item Be Purchased By Another Person During Your Loan Repayment Window?

Know that your item is safe at the pawn shop as long as you are within the loan repayment window. If you do not pay back the loan, your item will be forfeited to the pawn shop and they will have the ability to sell the item for a profit. Since it is a collateral-based loan, your credit won't be impacted for forfeiting the item. Once an item has been forfeited, only then will it be possible for someone to purchase the item from the pawn shop. Keep in mind that you can always buy back the item at the full price if you miss the repayment window and the pawn shop still has the item in their store. 

To learn more, contact a pawn shop.