Which is Better: Payday Loans or Pawn Shops

Often, many people find themselves without enough cash on hand to make it to their next payday.

In such situations, there are a few options available to help make ends meet. Two of these options include payday loans and pawn shops.

Payday loans, also referred to as payday cash advances, are short-term loans that offer borrowers a repayment window of 14 to 31 days. Payday lenders typically require the borrower to provide a check written out for the amount of the loan or the borrower's bank account information in order to obtain the payday loan.

With a pawn shop, the borrower exchanges an item of value for a short-term loan. The pawn shop then holds the item until the loan is repaid.

Pawn Shop Drawbacks

When deciding between these two types of short-term loans, it is important to carefully examine each option to determine which one is the best option for you. In your examination, you will find several drawbacks associated with pawn shops that could lead you in the direction of your nearest payday loan provider.

Payday loans offer more convenience than pawn shops.

When securing funds from a pawn shop, you have to physically go to the pawn shop. Additionally, many pawn shops are not open 24-hours per day so you will need to be able to go the pawn shop during its regular business hours, which might not work for your schedule.

In contrast, you can secure a payday loan any time of day via the Internet. All you need is a computer and your bank account information and you can secure online payday loans quickly and easily.

Payday loans do not require collateral.

In order to get cash from a pawn shop, you have to hand over an item of some value. Often, desperate individuals will hand over expensive electronics or heirloom jewelry that has been in their family for ages. This process can be a painful ordeal. Additionally, you are at risk of losing that item if you miss your repayment due date for any reason.

With payday loans, you do not need any collateral to secure the loan so you won't have to risk of losing a cherished item in order to get a loan.

Pawn shop loans are less than the value of your collateral.

In order to cover their expenses, pawn shops do not pay borrowers for the real value of their collateral. If a borrower is unable to repay the loan, the pawn shop will sell the borrower's item at a price higher than the loan in order to make a profit off of the transaction.

Since payday loans do not require collateral, you do not need to worry about how much you can get for the item you are handing over to the pawn shop.

Pawn shops charge extra fees that payday lenders do not.

In addition to interest on the loan, a pawn shop can charge many other fees. These fees often include the cost to appraise your collateral, the cost to submit information about your collateral to a police database to ensure it is not stolen, and the cost to store the item. Additionally, some cities charge pawn shops transaction fees that pay for police resources - these fees are then passed on to the customer.

With a payday loan, the only fee you need to pay is the interest associated with the loan, which is communicated to your up front.