In this episode of
Money Creation Explained we are going to cover How Secure
Loans are Better than Pawn Shop Loans.
Most people are familiar with Pawn Shops. One way that Pawn
Shops make money is by offering cash loans for valuables. A
typical situation is that someone needs money now and their
next paycheck could be a week away or they have bills that
are due now or will be past-due soon. They go into their
local Pawn Shop with their valuable item or it might have
sentimental value like a family heirloom. The appeal of the
Pawn Shop loan is that is a fast and easy option to get
money that same day, with no credit check and it does not
matter if they have a low credit score because the loan is
based on the item that they bring in. Also there are no
credit consequences if the loan if not paid back. Their
credit score will not suffer and no debt collectors will
come after the person.
An example transaction is as follows: you bring in an item
of value to the pawnshop and it is worth $1,000. The
pawnbroker offers you a loan that is typically 25% of its
resale value ($250) with a financing fee of usually between
10% - 25% each month (which translates to around 200% APR).
You usually have 1- 3 months to pay back the loan depending
on that particular Pawn Shop. If you do not repay loan on
time, the pawn shop can sell the item for its full value and
you will not get reimbursed if your item sold for more than
the loan amount.
An alternative solution would be
Secure Loans which is a service offered by IOU Notes. It
allows users to leverage their own funds to obtain small
loans for personal and business use as needed and never pay
more than 5% interest per year on those funds. Using our
service a user can have a dependable emergency loan option,
help build or rebuild their credit, budget their money
better, and stop paying high interest fees from other loans.
This service was created because of the need for affordable
small loans.
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