Kembara’s Financial Solutions – Pawnbrokers and Payday Loans
There are alternative options available in the shape of pawnbrokers and payday loans for people who are relatively anxious to obtain money — frequently where the banks and credit card providers have already surpassed the maximum lending available. Something of value that gives the pawnbroker some security is needed in order to get a loan from them. This could be a wedding band or another priceless item of jewelry, such a timepiece. A valuable item (either real, sentimental, or both) that the pawnbroker may keep and store until the loan is repaid must serve as the security. Typically, the pawnbroker decides on the loan right away. Generally speaking, borrowing money from a pawnbroker carries a substantially higher interest rate than borrowing money from a bank or using a credit card. Payday loans are advertised as loans that give borrowers access to cash before their next paycheck from their work. Although they are a very pricey kind of borrowing, the offer is fairly straightforward, as demonstrated in the example below. Example Mr. Short is given the opportunity to "borrow up to £1,000 instantly" by a payday loan operator. The lender will make a decision right away, which is good news, but the loan will cost you '£16.80 per £100,' which is bad news. In accordance with the agreements, reimbursement is due three weeks from now on Mr. Short's next pay day. Therefore, the cost of borrowing is 16.8% for just 21 days, or about 292% annually! In certain nations, like the UK, the regulator has put a cap on the rate of interest that can be charged due to public uproar over the high rates of interest charged. Payday lenders in the UK are now only permitted to charge 0.8% per day as of January 2015. In conclusion, loans from pawnbrokers and payday loans are: • readily available — decisions are frequently made right away; • very expensive compared to other borrowing options; • for pawned items, repayment is necessary to reclaim ownership from the pawnbroker; • for payday loans, loans are very short-term, with repayment due at the following payday.
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