Choosing Among a Personal loan, Payday Loan or Pawnshop

By | April 19, 2019

 

Sometimes, life does not allow us to have a perfect financial health. A personal loan, payday loan, or pawn loan can be a viable option when you are in need of cash to get through your next payday. This article will look at these 3 options to help you decide which is right for you.

Personal Loans

If you need a small loan for a short time, a personal loan can be your best option. This is because it is likely to have lower interest rates and fees when compared with the other options. The drawback here is that most lenders are not usually willing to loan small amounts for short periods. Typically, personal loans don’t have repayment penalties, so you won’t get penalized if you pay off the loan early. Peer-to-peer lending (P2P) is another type of personal loan transaction. These lenders will quote you an interest rate that won’t affect your credit score.

Pawn Loans

Pawning an item you own is another option you have when you need to get a loan but the drawback here is that for you to get $500 as a loan you might need an item that is worth $1,200 to $1,500. Also, you will have to pay a ticket fee, a high interest rate, and often a handling and storage fee. The interest rate is from as low as 30% to as high as 300% depending on the state. Apart from this, the loan term is typically between 1 and 4 months and it also varies by state. The repayment term for this type of loan is typically from 30 days to a couple of months. You risk the item being sold to cover the balance if you default on the loan. The process of applying for a pawn loan and approval process is very simple. All you need to do is take in the item you want to appraise for the lender to determine its worth. Once this is done, you will need to complete any paperwork and present s government issued ID. Also, pawnshops will not require proof of how you intend to repay the loan from you.

Payday loans

Payday loans are short term high cost loan that can give you the money you need until you receive your next pay check. Payday loans are regulated by the states and it is currently available in 36 states. The average annual percentage rate is 391%. For other states, they regulate payday loans by either capping the interest rate at a low level or enforcing other laws. According to PEW, the average payday loan borrower is in debt for up to 5 months of the year, spending an average of $520 in fees to repeatedly borrow $375. Your bank will charge you overdraft fees if you don’t have sufficient funds in your account when the loan is due. The lender can choose to sue if you don’t repay. The lender may be able to take money from your bank account or garnish your wages of the lender wins a judgment against you. Payday loans online are an expensive option, although they often have optional renewals that allow you to move from one payday to the next.

A personal loan can be a better option than taking out a payday loan or pawning your jewelry if it can help you meet a financial goal like debt consolidation along with providing you with the loan you need to make ends meet.

 

see more: https://www.opploans.com/blog/5-reasons-to-avoid-pawn-shop-loans/