You need extra money fast and are about to pawn your piece of jewelry or designer watch. Great idea! You can get cash on the spot and then you will have the opportunity to retrieve your item once you have repaid the loan, interest, and any other fees. What happens if you do not return to reclaim your pawned item? Or you may be worried about what happens if you cannot repay your loan on time.
First, how does a pawn loan work?
Many people use their valuables on a regular basis to help make ends meet. Oftentimes when the need arises for short term financial help due to an unforeseen expense a pawn loan is the best solution. Pawning an item is quick and easy.
The borrower simply brings the item they wish to use as collateral to help secure the loan to the pawn store. The loan amount is based on a percentage of the value of the item being used as collateral. The borrower must repay the loan in full plus interest and fees in a set amount of time in order to get their item back from the pawn broker.
Know your options when the loan is due
Unlike other loans, when a pawn loan is due, the borrower has multiple options. The borrower may 1) fully repay the pawn loan and retrieve the collateral item, 2) pay the interest due then renew the loan for another set amount of time, or 3) choose to default on the loan by not paying back any part of the loan and therefore forfeit the pawned item.
The borrower may fully repay the pawn loan to retrieve the item on or before the due date. If you are unable to repay the loan in full when it’s due, you may be able to renegotiate the loan. Usually you will be required to pay the interest due from the first loan but will not be required to pay any on the principle part of the loan. You will be charged an additional fee each time you must renew your loan based on the amount owed, so it is an excellent idea to pay the interest plus any additional amount you can pay towards the principal balance (or borrowed amount) to decrease the overall cost of the extension of the loan.
A customer can choose to not pay back the pawn loan for any reason (they do not have to explain why to the pawn shop). Instead of repaying the borrowed money they will just relinquish the collateral items to the pawn shop. When this happens the pawn shop will sell the items as they see fit.
Not being able to pay off a pawn loan has no effect on a person’s credit score. This is a major difference and benefit of pawn shop loans. Credit is not part of the transaction. The value of the collateral items covered the amount the pawn shop loaned to the borrower. When the loan is not repaid the pawn shop simply uses the collateral items to cover the amount of money loaned and not repaid by selling off the items. You cannot expect regular car or other secured loans taken through a bank to work this way. They will report your non-payment of the loan to credit agencies while repossessing your car. This can make it much harder to get a traditional loan or credit card in the future.
What can you do if your item is forfeited?
Although it should not be relied on, it is not unheard of for a relinquished item to be repurchased at a later date by the person who originally pawned it. A surrendered item which remains available for sale may be able to have its pawn loan reactivated for the interest amount due plus fees if all components of the original pawned items remain available.
Despite what some people may believe, pawnbrokers do not set out to confiscate pawned items so that they can sell the items in their shop. In fact, it’s in the best interest of the pawn broker to have the loan repaid and the item returned to its original owner. This helps to create happy customers who are likely to return to pawn the same (or more/other) items should they need extra funds again in the future. Pawnbrokers know that if they sell an item that was pawned, they will only make their money back once. But if you pay back your loan and recover your item then need their services again, that same item could create repeat business for the pawn shop in the future.
What if you accidentally leave an item at a pawn shop?
Remember all that information they collected about you when you first set up the pawn loan? The pawn broker will use it to attempt to find you in order to return your items to you. They do not want to hold them if you have paid back the loan completely. They want you to get your items back. So answer your phone when they call!! And make necessary arrangements to pick up your collateral items.
AZ Jewelry and Loan is one of the best local jewelry pawn shops to work with when you are using jewelry or other types of vintage items as your pawn loan collateral. We give the best offers because we really know the worth of your jewelry and other high-value objects due to our vast experience with those types of items. Contact us or come in to our store to see what we can do for you.