We have all had moments in our life where we desperately needed money and needed to look for quick and easy options. In situations like these, pawn shops often spring to mind, but most people are skeptical about what the best possible option is when it comes to pawn shops.
Pawning is better for situations where you don’t want to permanently part with the item, whereas selling is a quicker solution, and you don’t have to pay back. Whether pawning is better than selling depends on the context of the situation. Pawning and selling will likely get you the same price for your valuable item when you take it to a shop.
The only difference is that pawning an item means that there is a chance that you may get it back if you pay the loan off in due time. Pawning is better for situations where you don’t want to permanently part with the item, whereas selling is a quicker solution, and you don’t have to pay back.
Curious to learn more about the two and which option is more suitable in what situation. Keep reading this article.
What Does It Mean To Pawn?
Pawning means taking an item to your local pawn shop and leaving it there as collateral in exchange for a loan. The pawn shop owner determines the loan’s value, typically known as the pawnbroker.
You are given a loan equivalent to the presumed value of your item and a time frame within which you must repay the loan to acquire the item back.
What Items Can Be Kept As Collateral At A Pawn Shop?
People generally pawn valuable items such as antique jewelry and furniture. They might also pawn family heirlooms or other expensive intergenerational objects lying around the house. But pawning is not limited to antiques; you can also pawn gold and silver jewelry.
Some people end up using electrical devices as collateral.
How Is The Price Determined For Valuables At A Pawn Shop?
The value is determined by a system known as the current appraisal system, in which the object’s worth is determined by how likely it is to be sold again in the market. Sometimes this value is measured against the object’s market value, i.e., gold’s standard value.
Generally, the pawn broker determines an object’s value, and it is up to their discretion to decide how much loan they are willing to give for it.
To learn more about how pawn shops work, watch this
Is There Interest On The Loan You Take From A Pawn Shop?
The pawnbroker earns their income by charging interest. This is one drawback of pawning instead of selling. You may have to pay more money in return. The broker determines the interest rate, which varies according to state. Some states, such as California, have interest rates as low as 2%.
The interest rates generally vary from 5-25%.
What Happens If You Don’t Pay The Loan On Time?
When you pawn an item as collateral, you are given a receipt with a standard time period of around 30 days. If you fail to pay back the loan in this duration, the item officially falls under the custody of the broker and they can sell it to whomever they want.
What Makes Pawning A Better Option Than Selling?
Whether or not pawning is better than selling depends heavily on your circumstances. There are several factors that make pawning better than selling.
Your Items Are Safe And Can Be Returned
Pawn shops have a responsibility to keep the valuable that you leave as collateral safe because they are supposed to make money out of it. If you are pawning an item such as a family heirloom, you would most likely want it back. This option exists in pawn shops but not when you are selling your item.
You Can Extend Your Loan Payment Date And Pawn The Same Item
Pawn shops are an easy way of acquiring money using the same item. If you repay the loan on time and get your valuable back, the same valuable can be used as collateral later on if the need arises. This is one advantage pawning has over selling because when you sell the item, you can only acquire money once.
In case you are unable to pay the loan, it is up to the discretion of the broker to provide you with an extension or a few grace days so the situation is not as dire as it seems.
What Are The Benefits Of Selling Over Pawning?
There are certain contexts in which selling can be more advantageous than pawning, this is especially true for cases in which the seller does not mind parting with the valuable.
Selling Can Help You Make More Money
Pawn shops offer more money when they are buying the item and claiming ownership over it. This also depends on the item for example, gold and silver artifacts usually help you acquire more money.
There Are No High-Interest Rates
Pawning an object may help you get money immediately, but when you have to pay back the loan, you will probably end up paying more than you got. This means that the seller does endure a degree of loss. This is not a problem when it comes to selling an object because you just get the price for it on the spot.
It Helps Get Rid Of Valuable And Unwanted Items
Sometimes we have certain items that may be valuable in terms of market rate but they don’t serve much utility. In this context, pawning is futile because you don’t really have much use of the object. Selling helps you exchange the object for money that can be invested elsewhere.
The Bottom Line
Pawning and selling both have their pros and cons. The only difference is that pawning comes in handy if you want to keep using the same object to garner a loan multiple times. It also comes in handy when you don’t wish to part from the object. But if you want to make quick and easy money without any interest added to it, selling is the right choice for you.
