Only 39% of Americans have the money to cover a $1000 emergency.
In these economic times, it can be difficult to find cash quickly.
One option is to sell an old instrument, like a harp, which can sell for up to $5000.
But let’s face it parting with an instrument that is loved can be difficult. Selling a harp can mean never seeing it again.
However, there is an alternative. One that allows the owner of the harp to get money for it while having the option of getting it back.
This option is pawning.
Pawning often has a spotty reputation, but it can be a great alternative to selling when someone needs cash.
But what are the benefits of pawning vs. selling? And why should someone choose to pawn vs. selling a harp?
Keep on reading to learn more!
The difference between pawning and selling is ownership.
When a harp is pawned, it still belongs to the original owner. And as long as the loan is paid back in time, the owner can still get it back.
The drawback to this is that money has to be paid within a set period with interest.
The easiest way to think about pawning is like taking out a loan and using the item being pawned as collateral. That’ll be given back once the loan is paid. If the loan isn’t paid or the person defaults the pawn shop claims ownership of the object.
Although there are a lot of benefits to pawning vs. selling there is one serious drawback.
Often the pawn shop will pay less money than the item is worth. But this may not be that bad given that the money will eventually have to be paid back with interest.
There is a way to avoid pawn shops low payouts. And that’s to develop a business relationship with the broker by being a repeat customer and having a good repayment history.
Though pawn shops a notorious for lowballing, this doesn’t have to be the case. There are sites like PawnGuru that collect information from thousands of different pawn shops. This helps people find the best offer when pawning their harp.
Interest fees are the essential difference between pawning and selling. Many people would consider pawning overselling, but they fear the high-interest rates.
In fact pawn shops often get their spotty reputation because of their high-interest fees. Some pawn shops can charge as much as 10% monthly interest on average. While in some states interest rates cannot exceed more than 5% per month.
Though high-interest rates can be scary for some as long as pawning is done responsibly, it can be a great alternative to selling.