How Does A Pawn Loan Work?
Owning precious metals, such as gold and silver can come in handy when you are in urgent need of instant cash. You can use them as collateral to apply for a pawn loan, which allows you to borrow money without the hassle of proving your credit worthiness. Although individual states have specific laws pertaining to the repayment period, the typical term length allowed is usually 30 days plus an additional similar grace period. So how does a pawn loan work? Below is a brief overview that will guide you.
Valuation of the item
If you want to take a pawn loan against your precious metal, its value must be determined. The amount you will receive will depend on the appraisal value of the item. The pawn shop owner will use research tools to determine the current market value of the item. Another factor that is critical during the valuation process is the condition of the item. For instance, gold will be tested using a special acid to ascertain the karat value. Once the amount you can get on the item is determined, you must provide a valid photo ID before the loan is approved.
Repayment period extension
You are expected to pay back the full pawn loan plus the interest charged within a stipulated period of time, which is mostly 30 days. However, if you fail to pay the loan fully by the due date, the pawn shop owner can extend the repayment period as long as they are not contravening the state laws. However, you must pay a part of the interest you owe as per the guidelines given by the state laws. After this, you will be allowed to extend the repayment period of the loan for the number of days stipulated by your state.
Provision for renewal
It is possible to renew your pawn loan if you are not able to settle it in full after the expiry of the agreed period. As long as your state laws permits renewal, all you need to do is to settle the interest accrued in full and apply for a new pawn loan. The interest and the principal amount of the new loan will remain the same but the due date will be adjusted for a full period length.
Claiming back the item
The pawn shop owner keeps your item in a secure location and ensures it remains in good condition. Moreover, pawn shops are fully insured against the value of all the collateral they keep. Therefore, once you pay the full loan amount plus the interest, you can collect your item from the shop. Contact a business, such as Wimpey's Pawn Shop, for more information.
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