What is A Pawnbroker and How Do They Work?

When you consider doing business with a pawnbroker, you’ll find that you end up having two choices available to you. Either you will be able to leave something valuable at the pawn shop as security for a loan that you would like to take out. For instance, this might be an antique item or a piece of valuable jewelry. Alternatively, you can sell that item to the pawnbroker. Here, we’re going to look at the concept of using a pawnbroker to get a loan. It’s worth remembering that pawnbrokers are useful for some people because they lend out money fast without the need for a credit check. However, they also charge interest rates that are much higher than those at your typical bank.

How Pawnbrokers Work

When you use a pawnbroker, you hand over a valuable item to the person in question and they will value it for you. Your pawnbroker will give you a pre-contract information document which details the information about your credit agreement before the transaction continues. At this time, you will sign an accredit agreement with your broker, and you will have an amount of time in which you’ll need to pay back the loan. The maximum time limit is usually around seven months, but it can often be a lot less.

Your pawnbroker will give you a receipt for your item which you will need to use as proof that you own the item that’s being used as security. Once you have repaid the money that you owe to the broker, you’ll be able to reclaim the item. However, if you don’t repay the loan that you have been given in the term agreed then your broker will be able to sell the item to get the cash that they are owed. Additionally, there’s sometimes a chance to extend the loan if you’re willing to pay interest.

Understanding Pawnbrokers

You should expect to pay a rate of interest with a pawnbroker that is much higher than what you might get from a typical high street bank or building society loan. However, this will often be an amount that’s still lower than the interest rate of a payday lender. You should be quoted a rate of monthly interest; however, the pawnbroker will also need to provide you with an APR or annual percentage rate, which you can use to shop around and find the most competitive interest rates.
One interesting thing to remember about pawnbrokers is that you will usually be able to pay back the full amount that you owe at the end of your agreed term, rather than having to pay it back in regular installments. Additionally, you should be able to pay back whatever you owe early too. If you need an extra amount of time to repay, then the pawnbroker will sometimes be willing to draw up a new agreement for credit. However, it’s important to remember that pawnbrokers can also refuse to give you extra time.

The Benefits and Negatives of Using Pawnbrokers

Perhaps the most obvious benefit of using a pawnbroker is that you won’t have to worry about any credit checks affecting what you can borrow. Additionally, using a pawnbroker is quick and simple, and you should be able to get your hands on the money that you need on the same day that you sign your agreement. What’s more, a pawnbroker will also allow you to redeem your goods at any time that you like, and you’ll only be charged the interest on the time that you have borrowed the money for.

With a pawnbroker, it’s the pawnbroker that takes the risk if the valuation of the item was given was wrong. If the item is sold and doesn’t cover the costs of the debt, that’s not the customer’s fault.

However, using a pawnbroker can also be a very expensive way for some people to borrow money, particularly when you compare this option to other kinds of borrowing. You will usually only be able to borrow a percentage of the value associated with the item that you’re thinking of pawning. This means that if your jewelry, for instance is worth £200, you may only be able to borrow £100, or £50.

If you Can’t Pay Your Pawnbroker

If you’re unable to pay back the money you borrow by the given deadline and you don’t want your item to be sold, then you’re going to need to request that the deadline be extended. However, pawnbrokers don’t have to extend your deadline, so you may find that you have no choice but to let your item go.
Usually, most pawnbrokers will be more likely to give you more time on paying back the amount you owe if you have at least paid off the interest on your last borrowing period.

Should I Transfer my Credit Card Balance?

A balance transfer can help you to reduce the costs of your credit card borrowing and consolidate a range of different debts. Sometimes, they can even help you to lower your monthly outgoing expenses too. A balance transfer, or a credit card balance transfer takes place when you move the existing debt on a credit card from one card onto another card that often charges a much lower rate. Some cards even offer 0% interest for a certain amount of time, and this can help you to save a lot of money in terms of interest payments.

Transferring your balance can be a great way to ensure that you pay less on your existing debt, particularly if you’re currently paying high amounts of interest. Additionally, some people use credit card transfers to help them organize their finances and take control of their debt problems by consolidating a range of different credit card debts into a single monthly payment.

How Does a Balance Transfer Work?

Imagine, for instance, that you have built up a lot of credit card debt on your existing card. This debt might be set at an interest rate of around 18% on average, which means that you not only have the amount that you owe to pay back, but that interest too. Switching the outstanding balance on your current credit card into a 0% card that allows for balance transfers means that you will be able to ignore that typical 18% expense for a specific time period, until the deal expires. Some companies offer 0% interest for as much as three years, or even longer, depending on the circumstances.

For people who can find a way to clear all of the debt that is owed by the time the 0% interest deal ends, it’s possible to pay absolutely no interest on the balance that you might have had to pay hundreds or thousands of pounds in interest on otherwise. In other words, it’s a lot like taking out an interest-free loan.

Balance Transfer Fees

Although it’s safe to say that credit card balance transfers can have a lot of great benefits, and potentially save applicants a lot of money if they know how to manage their debts properly, there are some risks to consider too. The catch in most balance transfer cards is that there will be fees to pay. The provider of balance transfer cards has two ways to make money. The first way happens when the cardholder doesn’t clear his or her balance by the end of the 0% introductory period. These people begin paying interest when the deal ends.

The second way that balance transfer providers make money, is with a fee that is calculated as a percentage of the amount that needs to be transferred during the balance transfer. Usually, the average fee is around 3% of whatever you want to transfer. That means that if you transferred an amount of £1200, you would need to pay a fee of around £36. You should make sure that you take these fees into consideration when determining if balance transfers are right for you. However, don’t let them put you off, as you can still save money with transfers, regardless of the fees.

Keep in mind that certain cards will also offer lower fees, but they might come with a shorter period of no interest.

What to Remember with Balance Transfer Cards

Crucially, it’s a good idea to avoid spending money on balance transfer cards, as you won’t always pay the same rate of interest for purchases as you would on the transfer itself. For instance, a balance transfer card might charge no interest for a period of two years on balance transfers, but it’s interest rates might be a standard 18% on purchases. What’s more, remember to:

Make sure that the interest rate that you’ll be given after the deal expires is competitive with other cards that you can get access too.

Check for transfer limits: You’ll need to ensure that you can transfer an amount that’s in the credit limit of your new card.

Examine extras: Many credit card providers may try to sell you fraud protection services and lost card solutions. However, the benefits of these options might not be that significant as the law protects you already to some extent.

Avoid making any purchases with credit cards that you have used to make balance transfers.

Once you have successfully applied for your balance transfer card and the lending company has accepted you and given you your new card, it’s important to play by the rules. Usually, you will need to switch out any of your existing debts within a period of sixty days, and you should also check the terms and conditions of your cards to make sure that you know what you’re expected to do. Failure to act according to the rules could mean that you don’t actually get the offer you signed up to receive.

All You Need to Know About Payday Loans

In simple terms, a payday loan is a sort of short-term advance that’s designed to help you pay for bills and other costs until payday arrives. Some companies allow you to choose your desired repayment period, rather than demanding that you repay the money on a specific day.

The problem with payday loans is that they can be extremely dangerous. Although they seem like a good idea, particularly to people who have bad credit histories and need to access finance quickly, the truth is that payday loans come with extremely high rates of interest that can end up getting you into severe amounts of debt very quickly.

Before you take out a payday loan, you will need to think very carefully about the options that you have for paying back the money that you’re going to owe. In other words, if you’re short of money for this month, you need to determine why you will be able to pay back the money that you need to borrow, plus the interest next month. For instance, you might be expecting additional income, or you may be able to cut back on spending considerably.

What Do Payday Loans Cost?

It’s hard to give an accurate assessment of what a payday loan is going to cost you without knowing your specific circumstances, but you can generally rest assured that these loans are going to be far more expensive to pay off than any of the alternative unsecured or personal loans that you might see on the market. In days’ past, most payday loan providers charged about £30 in interest for every £100 that you borrowed.

However, this only applied if you actually paid the loan that you owed back on time. If you weren’t able to make repayments as intended with your payday loan, then your provider would also charge another default fee, as well as daily interest. Today, new rules that have been implemented by the FCA ensure that borrowers should never have to pay over doubled what they borrowed to begin with. This is to assist with the problem of spiraling debts that has been impacted by payday loans.

Additionally, it’s worth noting that the same new rules dictate that anyone who is taking out a loan for a month and repaying the loan on time will not have to pay any more than £25 in fees and charges per the £100 they borrow. There is a further cap implemented onto default fees. However, even with these caps and regulations in place, it’s easy to see that a payday loan can be very expensive, and very dangerous when used without the proper care and attention.

Alternative Options to Payday Loans

In most circumstances, you’ll find that the best thing you can do when you’re desperate for cash, is consider alternatives to payday loans. Though a payday loan might seem like the only choice you have, there are usually other options out there. For example, authorized overdrafts on a current account are typically much cheaper than payday loans when it comes to short-term lending. However, unauthorized overdrafts are very expensive, so you should be absolutely certain that your overdrafts are authorized in advance.

Another potential alternative to a payday loan is to think about joining your available credit union. Usually, credit union loans will take a little longer to arrange than a standard payday loan, but the law limits the interest rates on these borrowing options to a maximum APR of 42.6%.

Additionally, even credit cards that are designed for people who suffer with bad credit ratings generally offer a far better deal than most payday loans. With an APR of around 30% you would still end up paying a lot less interest with this kind of credit card then you would have to pay on a payday loan. However, it’s important to note that you would have to be disciplined and make sure that you pay back your credit card balance over as short a period as possible.

In terms of credit card borrowing, if you only ever make the minimum repayments, miss out on the payments that you’re supposed to make, or you go over the limit that’s been implemented on your card, you could end up not only causing damage to your credit rating, but also facing severe charges and penalties that cause your debt to spiral far out of control.

Avoiding the Trap with Payday Loans

If you struggle to repay a payday loan, there’s a chance that the lender might try to tempt you with an extension called a rollover or a deferral. Alternatively, the lender may even provide a further loan. However, in this case, you will need to receive an information sheet with the providers of free debt advice before you roll over.

Although rolling your payday loan over can seem like a good idea at the time, it leads to paying a lot more interest and could cause serious financial problems.