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15 Feb

Pawn vs. Sell – Which Is The Better Option?

There often comes a time when we need to leverage our possessions for cash. Whether it’s to cover unexpected expenses, fund a new venture or any other opportunity, the question arises: should you pawn the items or sell them outright? While selling the assets might seem to be the first option to come to your mind, both methods can help you generate the money you need.

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The decision, however, depends on your unique needs and preferences. Here, we cover both sides of this ‘pawn vs. sell’ debate so you can confidently decide which path is best suited for your financial situation.

Taking a Pawn Loan

Pawning is a type of collateral loan. When you pawn an item, you use it as collateral to receive a loan from the pawnbroker or pawn shop. From jewellery to luxury watches or any other items of value, you can pawn anything to access immediate funds.

However, it’s important to note both the benefits and drawbacks to make the best choice.

ADVANTAGES OF PAWNING

  • Retain ownership of your items

When you sell the item, you instantly lose your ownership. On the other hand, if you take a loan against it or pawn it, you utilise its worth while retaining ownership throughout the loan period. This is one of the most appealing aspects of pawning. For instance, pawning the item is the best option if you have a piece that holds sentimental and emotional value. Pawnbrokers will return it to you once you repay the loan.

  • No credit checks

Unlike traditional loans, pawn loans do not require a credit check. If your credit score is less-than-perfect or you’ve been denied credit elsewhere, you can still access cash by pawning your possessions as collaterals. This aspect makes pawning more accessible for obtaining quick funds. Pawn shops have a streamlined process that doesn’t require credit checks, and they move quickly from valuing your assets to transferring the funds.

  • Access funds same-day

One of the most significant advantages of pawning is the ability to obtain cash quickly and conveniently. Unlike other forms of borrowing like bank loans or credit cards, which involve lengthy application processes and approval timelines, pawn transactions are completed on the spot and the same day. The valuations are quick, and the pawnbrokers consider various factors to provide an accurate loan offer. This makes pawning an attractive option for anyone in need of urgent funds.

  • Pawn your valuables over & over again

A great reason to pawn your luxury assets is that you can use the same item repeatedly to secure a loan once you repay the loan to a pawnbroker. This implies that if you encounter any financial crisis in the future, you can always pawn the same item to obtain a loan. This option is not valid if you sell the item.

  • Flexibility 

Pawnshops typically offer many added benefits that make them a viable option to reach out during financial stress. They offer flexible repayment terms, allowing borrowers to reclaim their items at a time feasible for them. This is advantageous for individuals needing more time to manage their finances. What’s great is that this extended loan term doesn’t appear on the credit history.

DRAWBACKS OF PAWNING

  • Risk of losing your valuables

When you pawn an item, you use it as collateral for a loan. If you fail to repay the loan at the end of the agreed loan period, the pawnshop or the pawnbroker has the right to sell the item to recover the loan amount and the accrued interest. This means you’re always at risk of losing your valuables if you cannot repay the loan.

  • Not all valuables are accepted as collateral

While pawnbrokers accept different types of high-end assets as collateral, not all of them are suitable. This may be due to their condition, size, provenance or any other reason. Moreover, in some cases, pawnbrokers accept items with a minimum value. Therefore, it’s essential to check whether or not the item you possess can be used as collateral with a pawnshop.

  • Short repayment time

Pawn loans are typically offered for short durations, ranging from a few weeks to a few months. This means borrowers need to repay the loan plus the accrued interest within a relatively shorter time frame. For individuals facing financial difficulties, this short repayment term can add additional pressure and may even increase the chances of defaulting on the loan.

  • Higher interest rates

Pawnbrokers typically charge higher interest rates on pawn loans than other borrowing forms. This can increase the overall cost of borrowing, especially when the borrower is unable to repay the loan quickly. As a result, the borrowers end up paying a substantial interest fee apart from the loan amount.

Selling Your Item

Consider selling your valuables for instant cash if you no longer want or need an item. But it also has its own set of pros and cons.

ADVANTAGES OF SELLING

  • Full cash payment

Unlike a pawn loan, where you typically receive a fraction of the item’s value, selling allows receiving the full cash value of the item upfront. The immediate payment is advantageous if you require a larger sum of money.

  • No repayments

If you’re unsure whether you’d be able to repay the loan within the specified time, retrieving the value of your asset at once by selling it may be the best option for you. Selling luxury assets allows you to secure funds in one transaction without dealing with the hassle of loan repayments and interest fees.

  • Convert unwanted items into cash

Selling unwanted or unused items that no longer serve you lets you release their value and move forward without taking further care. It’s a great way to get quick cash for something you no longer need.

  • Potential for profit

If you possess valuable or collectable items that may appreciate in value or hold their value really well, selling them at the right time and to the right buyer can allow you to get a significant return on investment. For example, if you own a vintage luxury timepiece with a remarkable history, selling it will present an opportunity for profit.

DRAWBACKS OF SELLING

  • Lose your valuables forever

Once you sell the items, there’s no going back. You part with them permanently. Often, during financial shortfalls, the thought of selling an item comes unexpectedly instead of pawning. Remember, selling the item, particularly if it’s a rare or treasured valuable, will take away the ownership forever.

  • No option to resale the item again

Once you sell an item, you can no longer access its value or potential for future financial leverage. This limits your financial flexibility, especially if you encounter unexpected expenses or emergencies in the future. Unlike pawning, which offers access to cash without permanently parting with it, selling can be a less flexible strategy.

  • Time-consuming

Selling your assets outright requires time and effort, as you have to sell the item effectively. The process usually involves taking photographs, responding to enquiries, negotiating with potential buyers, etc. Moreover, depending on the item, model and market demand, it may take days, weeks or months to find a suitable buyer willing to pay the desired price. In such cases, pawning is the best option.

  • Pay commissions

If you sell to marketplaces or auction houses, you may have to pay seller or commission charges or fees upon selling your item. You must understand the charges, fees, and costs involved before selling your valuables.

Making The Decision..

So, which option is the better choice: pawn or sell? Ultimately, the answer depends on your individual circumstances, priorities, and preferences. If you need quick cash and are confident in your ability to repay a loan within a specified timeframe, pawning may offer a viable solution. It allows you to retain ownership of your item. However, if you want to declutter your space or need immediate cash without the risk of repayment, selling outright may be the better option.

Regardless of your chosen route, it’s essential to approach the decision thoughtfully and consider the implications carefully. Take the time to research and compare offers from pawnshops or potential buyers. Don’t hesitate to seek advice from professionals, if needed, to make an informed decision that aligns with your goals and helps you unlock the full potential of your assets.

Here are a few questions you can consider asking yourself while making the decision:

  • Do you want the item back?
  • How much money do you need to meet your needs?
  • Do you have any sentimental or emotional attachment to the item?
  • Will you be able to repay the loan amount within the specified period?
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