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Types of alternative credit: Pawn Loan
Transcript of Types of alternative credit: Pawn Loan
Definition of Pawn Loan
loan based on the value of personal property. The property is held until the borrower repays the loan, including any agreed upon fees. If the borrower does not repay the loan than the property given is kept as payment.
Interest rates and fees
The interest rate varies depending on what the pawn shop agrees too, however the total interest with fees can not be higher than 20% as regulated by Illinois (Monster Pawn). Typically the fees are for regular loan charges and has storage fees per month to hold the item in the shop.
What is the average APR and/or fees paid
Typically storage fees
What are the sources of credit
The source of credit would be any pawn shop such as midwest exchange in Bloomington.
When might a consumer seek
this type of credit
A consumer would use this type of loan if they do not have good credit and can't get a loan or if they like having the comfort that even if they don't pay back the loan they won't be turned in to a collection agency, they just lose whatever property they gave.
The advantage of Pawn Loans is that there are no credit checks. Another advantage is that even if the loan can't be repaid you aren't turned into a collection agency.
The loan is limited to the value of the property so the loan amount is very limited, the average pawn loan is $80 (Monster Pawn).
The loan is usually set no higher than 50% of the value of property to ensure that the pawn shop has technically already gotten it's money back even if the loan wasn't repaid.
Payday loan- quick cash other than pawn shops
Title loan- potential for higher loan #
Rent to own- own the property as long as it is repaid.
Example of a company in your community or media that
provides this credit
Monster Pawn, Midwest exchange