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What’s wrong with a pawnshop loan? Just about everything

On Behalf of | Mar 27, 2022 | Bankruptcy

We don’t hear much about pawnshops these days. With credit card cash advances and quick loans far more accessible than they used to be, not as many people use them. However, they’re still around. If you don’t have those options for quick cash and you don’t have a job that will allow you to get a payday loan, you may find yourself looking to see what you have of some value that you can pawn.

You bring in an item like a piece of jewelry, vintage toy, designer dress or handbag, musical instrument or something else a pawnshop owner can sell if you don’t pay back the loan. With a pawnshop loan, you don’t have to worry about your credit or your income being checked.

Understanding the limits and the cost

That item becomes the collateral that secures your loan. Typically, pawnshop loans are anywhere from 30 to 90 days, so if you won’t have the money relatively soon, you’re going to lose whatever you pawn.

Don’t expect to get thousands (or even hundreds) of dollars. The average loan is only about $150. What you can expect are hefty interest rates and fees. Texas, like other states, places some restrictions on these, but they’re still high. The maximum rate can be as high as 20%.

You have other options

If you really have something of value that you can part with, you’d probably be better off selling it to a collector or a business that buys jewelry and other valuables or putting it on a site like eBay or any number of apps and websites.

If you’re at the point where you’re considering a pawnshop loan, payday loan or some other high-interest option for getting the money you need for an emergency or even to pay your bills, it’s time to take a step back and look at the larger picture. A pawnshop loan is not a financial plan. Filing for bankruptcy, however, could be the option that will help you get out from under your debt and back on track.