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Are Pawn Shop Loans Even Worse Than Payday Loans?


One of the worst things about not having your own bank account is having to pay to use your own money.  Cashing a paycheck costs a percentage of the amount of a check, and the cost of money orders adds up when you don’t have a checking account or debit card to pay bills that don’t accept payment in cash.  People without bank accounts, many of whom work long hours at low-paying jobs, also have to pay a lot more than the folks in higher tax brackets do to borrow money, even in modest amounts.  With credit cards and large denomination loans unavailable to the unbanked, other financial products are available to fulfill consumers’ unmet need for credit, but while many of these products help consumers in the short term, they make the consumers’ financial situation even worse in the long term.  Payday loans get the worst reputation, because their interest rates can reach triple digits, but pawn shop loans can end up costing consumers much more than the amount of principal that they borrowed, too.  If you are in such a tight financial situation that pawn shop loans are your only option for paying your bills on time, a Miami debt lawyer can help you find a long-term solution for your debt.

Quick Cash Comes at a Steep Price

Certain industries have experienced a windfall at certain phases of the pandemic.  In the spring of 2020, it was video content streaming services and the manufacturers of face masks and the ingredients of banana bread.  As eviction moratoriums and pandemic relief money for rental assistance reassured consumers that they would still have a roof over their heads even if they paid for necessities, they spent money at supermarkets and Amazon and splurged by paying more than the minimum payments on their credit card debts.  Once the pandemic relief ended, consumers headed for the pawn shops in search of pawn shop loans.

When you take out a pawn shop loan, you deposit a valuable item (such as a game console, a musical instrument, or a piece of jewelry) with the pawn shop.  The pawn shop then issues you a loan for a fraction of the value of the collateral, and within 30 days, you must pay the loan back with interest, and you can get your collateral back.  The principal of most pawn shop loans is less than $200, but the interest rates tend to be in the double digits.  If you can’t pay, then the pawn shop might extend the term of the loan, including compound interest, but eventually it will simply seize the collateral.  It will sell the collateral for less than its original retail value but more than the amount of the loan.  In other words, pawn shop loans are a win-win situation for the pawn shop but not for the consumer.

Contact a South Florida Debt Lawyer About Avoiding Predatory Loans

A South Florida debt lawyer can help you find long-term solutions to your debt problems, so that you are not stuck paying high interest rates to borrow modest amounts of money.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.



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