When it comes to borrowing money, pawn shops and banks are among the first options that come to mind. However, these two alternatives differ in many significant ways. Let’s take a closer look at the differences between pawn shops and banks to help you decide when to use each one.
How Do Pawn Shops Work?
Pawn shops provide loans to people who use their personal belongings as collateral (also referred to as ‘pawning’). These collateral items can include jewelry, electronics, or even musical instruments.
One key advantage of using a pawn shop to get quick cash is that they lend money to people who may not have a great credit score or a long credit history.
Unlike your typical bank loan, you don’t generally need a credit check for a pawn shop loan, and no application process required. Simply put, pawn shop loans are primarily based on the value of the item you’re pawning.
There are two aspects you need to keep in mind when using a pawn shop. One is that pawn shops typically offer lower loan amounts compared to banks.
The second point to consider is that if you are not able to repay your loan on time, the pawn shop can keep your collateral. However, most pawn shops will give you the option of selling your item instead of pawning it. This way, you part ways with your item definitely, but you usually get more cash that if you pawned it.
Banks: What You Need To Know
Banks are financial institutions that provide a variety of loans for personal and business purposes.
When borrowing from a bank, the approval process can be lengthy and very strict: the bank wants to be sure that you are able to repay the loan you intend to take out.
The primary factors used to determine eligibility are credit score, credit history, income and debt. When any of these variables is less than impeccable, your chances of getting a bank loan decrease.
Plus, banks also tend to require a substantial collateral such as a home or car, to secure the loan.
Pawn Shops vs Banks: When to Use Each
Deciding whether to use a pawn shop or bank largely depends on your needs and financial situation.
Pawn shops are typically better suited for people who need money fast and don’t have the best credit. Banks, on the other hand, are better suited for people with good credit who need a larger loan amount and aren’t in a rush to receive the funds.
As you can see, both pawn shops and banks have their pros and cons. The secret is to understand what each option entails so you can make the decision that works best for you.
To learn more about pawn shops and pawn loans, check out our previous blogs, “Do Pawn Shops Buy Drones?” and “What Household Items Can I Pawn?”
AJ’s Super Pawn: Pawn Shops in Pomona and Chino, California
If what you need is a dependable, trustworthy pawn shop in Southern California, look no further than AJ’s Super Pawn.
We have locations in Pomona and Chino California. Give us a call today (Pomona: 909-622-0334, Chino: 909-465-5456) or fill out the contact form to get in touch with our team!