If you are in need of a small loan quickly, two of the most popular options are pawnbrokers and payday loans. Both provide a way of getting access to credit quickly, but they both have their advantages and differences. So which is most suitable for you? Here are a few things to know about each type of loan to help you decide.
When you choose to get a loan from a pawnbroker, one of the main advantages is that there are no credit checks involved. The pawnbroker will use an item of value that you provide as your security, and then if you fail to pay back the loan they can sell this to cover their costs. This can be useful for people who are unable to apply for other loans due to a bad credit record.
Another advantage of pawnbrokers is that loans are quick to arrange. Because there are no credit checks involved, the lender can often provide the loan on the same day.
Loans from pawnbrokers often come with lower interest rates than you may be able to get from a payday lender. This can make such a loan a cheaper way to borrow money.
However, with this type of loan you first need to provide an item of value in order to get the loan. And then you can only borrow as much as the item is worth, so this may limit what you can borrow. Then, if you fail to pay back the loan, you may lose the item, which you may not be prepared to risk.
Payday loans are also quick to arrange, and often you can apply for them online. There are many lenders to choose from, so you can compare them and find the most suitable. You can also read up reviews on various lenders, such as Wonga customer service reviews, which can help you to decide upon the most suitable lender in your circumstances.
Payday loans do not require any items of value like with a pawnbroker, but they do involve credit checks. However, they are often considered a suitable option for people with less-than-perfect credit records, although the lender can still refuse to provide credit.
They are also simple and straightforward to arrange. The borrower knows exactly how much the loan will cost them, and there is usually a single repayment date. This can make them a suitable way to apply for a short-term loan.
However, payday loans are not a way to borrow money in the long term. Fees can quickly add up when a borrower fails to pay back the loan, and this can also affect the borrower’s credit record.
Weigh Up the Pros and Cons of Each
Only you can decide whether a payday loan or a loan from a pawnbroker is the more suitable choice for you. Try to weigh up the pros and cons of each form of lending to help you come to a decision, and also look at your other options to see if there is a more suitable way to borrow money in your circumstances. After you have carefully considered your options, you can then make a decision on which form of borrowing is the most suitable for you.