If you need cash quickly but don’t want to take out a bank loan, you can easily get cash through a car title loan (www.southeasttitleloans.com), or you can bring valuable items to the pawnshop. Customers receive money there without a credit check and no repayment obligation – that’s how the pawnshops advertise.
How a Pawn Loan Works
Mostly it is people who do not get a loan from the bank who pawns valuable jewelry and other valuable items. For example, start-ups, freelancers, and the self-employed who could offer little security. In contrast to the bank, there is no credit check at the pawnbroker – in addition to the valuables, customers only have to present their ID and possibly a proof of ownership. There is already money.
Loans between 10,000 euros and 30,000 euros are not uncommon. The average loan is around 300 euros. Basically, customers can lend everything that is movable. In addition to expensive cars, designer handbags and belts and watches are also very popular. There is usually little money for electronic devices such as cell phones, computers, or televisions. The reason: the rapid decline in value.
Important to know: Tools or company cars are not available during the contract period. So customers cannot use them to execute orders. The objects rest unused in the depository of the pawnbroker. However, the majority of people bring jewelry.
How much money there is for Grandma’s gold chain is usually based on the daily precious metal price. The following applies to other items: the amount depends, among other things, on the resale value of the items – the pawnshop estimates this. The customer usually receives 50 percent or less. If you deposit a car of 100,000 euros, you can get around 50,000 euros. One of the reasons for the high discount is storage costs. There is also a risk that an auction will result in an amount below the loan amount.
In the case of a pawn loan, the item submitted is considered collateral. The customer is not liable for his personal assets and is not in debt. If someone does not repay the loan or does not release his pledge, the object will be auctioned publicly. This only happens in ten percent of cases.
The pawnshop receives the proceeds from the auction – unless they achieve a higher sum than the borrower used, then he is entitled to this additional proceeds. The customer has two years to collect this excess. The state then collects the money. So it regulates the state pawnbroker regulation of 1961.
Pawnbrokers have also been offering their services online for some time, such as Valendo, OnlinePfand, or Deutsche Pfandkredit AG. The conditions are comparable to those of classic houses. The main difference: The money is usually only transferred when the items have been checked by an expert in the pawnshop. Customers inquire about the network and get an offer. If there is an agreement, then the pawnbroker can collect the object of value.
The unbureaucratic loan option has its price. One percent interest accrues monthly, plus fees. These are laid down in the pawn loan regulation up to a loan amount of 300 euros. The fees are freely agreed for higher sums. Even if it doesn’t look like it at the beginning because of the small sums, lending an object is an expensive matter. Extrapolated over the year, this could result in an effective interest rate of more than 40 percent.
Another risk factor is the one-time fee that consumers have to negotiate with the pawnshop. The procedure is therefore only intended for short-term liquidity procurement. If you need money in the long term, you should choose other loan options.
Customers should only borrow as much as they really need. They should also keep the term of the pawn loan agreement short – this can limit the cost of the loan. Three months plus a one-month waiting period are usual. Within this period, customers can redeem the object of value at any time by repaying the loan, interest, and fees.
Most of the time contracts include an extension option. There is no official maximum term. It is advisable to compare the offers of several pawnshops before closing and taking the valuation of the item into account in addition to the fees.
The pawnshops do not have to inform their customers about due dates. So if you want to have your family silver or your company car back, you should pay attention to the trigger dates, advise consumer advocates and pawnshops – otherwise things will go under the hammer at auction.