Pawn Shop Interest Rate
A key point to remember when visiting your local pawn shop or an online pawn shop is the
interest rate the pawn shop charges. The interest rate a pawn shop charges varies from pawn shop to pawn shop
and state to state. When you pawn your assets, the pawn shop will loan you the money against the collateral you
pawn. This amount you can borrow from the pawn shop comes with hefty interest rates.
What is the interest rate will I pay for borrowing from a pawn shop?
Each pawn shop can set its own interest rate providing the interest rate does not violate the
state law regulating pawn shops. In many states, the state law set the maximum amount of interest (maximum interest
rate) the pawn shop can charge. For example, some pawn shop charges 24% annually or 2% a month. But, there are
a lot of hidden charges when borrowing from a pawn shop.
What are the hidden charges when borrowing from a pawn shop?
Other charges that a pawn shop can charge you when you bring
something to pawn are:
These fees a pawn shop charges can add to your interest rate
making it very expensive to borrow from a pawn shop. But, hey, if you are desperate, paying high
fees may be better than being evicted.
The state law may also regulate how much extra charges are allowed to add on to
the interest rates. For example, some state allows maximum charge for additional fees to be 20% per month. In
all, the total interest rate you will pay when borrowing from a pawn shop can amount to over 100% easily. When
using a pawn shop loan as a long term financing, it is a rip off and you will go bankrupt over the overall interest
rate you will pay to the pawn shop.
So, if you must use a pawn shop to pay your bills, make sure it is for a short term and perhaps
you can pawn items that you don't need so it is not a bad thing for the pawn shop to take your item and sell it as
theirs. But, if you must pay the pawn shop back because the item you pawned is too valuable to you, you will be
paying through the nose for it.