Let’s say you need a loan fast. Should you get a peer-to-peer loan from a place like Avant, or a pawn loan?
In this article, we’ll help you figure out what’s right for you based on your financial needs and expectations. For some folks, a peer-to-peer loan might be the right fit, but for others, a pawn loan may better suit one’s needs. First, a little context.
What is a Peer-to-Peer Loan?
A peer-to-peer (commonly abbreviated P2P) loan is another avenue to pursue to get a medium sized loan, $5,000 to $50,000. If you do not want to go to a bank or a credit union to get a loan for a mortgage, to refinance credit card loans, or refinance student loan debt, it is increasingly common to search out a peer-to-peer loan.
The peer-to-peer marketplace is a little complex. Instead of getting a standard loan from one institution, you get a loan from a crowdfunded source. For example, with a standard bank loan you would enter a bank with your credit rating, proof of income, and reason for needing a loan. The bank would look at your information and weigh whether or not to give you a loan. You wait a few days, and either get an offer or not from the bank. With peer-to-peer lending, you have your credit rating, proof of income, and reason for needing a loan and then apply to a peer-to-peer company for a loan. That company then asks a marketplace if they want to fund your loan. You wait a few days and then get a few offers to choose from with varying interest rates and varying repayment schedules. You can then choose which loan you want. You generally need a credit rating over 600 to apply.
Which Companies Offer Peer-to-Peer Loans?
You can get a peer-to-peer loan from SoFi, Avant, Upstart, Lending Club, Funding Circle, Prosper Marketplace, Peerform, or Circleback Lending. Each service has slightly different rules and lending amounts.
What is the APR on a Peer-to-Peer Loan?
The standard APR for a peer-to-peer loan is anywhere from ~7% to 39%. The standard APR for a bank loan is 6% to 36%. However, you generally need a good to excellent credit rating to get a bank loan and you merely need a credit rating of 600 or above for a peer-to-peer loan.
Why Would You Want a Peer-to-Peer Loan?
If you need a medium sized loan $5,000 to $50,000, and have the credit rating to back it up, you can opt for peer-to-peer loans. peer-to-peer loans are easier to get than bank loans and serve very similar purposes.
What If You Want a Smaller or Shorter Term Loan?
There are many ways to get smaller loans. One of the main problems with peer-to-peer lending is that you can only get a loan for a few thousand dollars or more. If you want a smaller loan you can go to 3 places, a credit union, a payday lender, or a pawn shop.
Credit unions are a great place to find a loan for under $2,000, but they usually require a good credit score. If you do not have a great credit score you can still go to a payday lender or a pawn shop.
Payday lenders tend to be predatory and charge high interest. They do check your credit score and will send debt collectors after you if you do not repay the loan.
Pawn loans are actually nicer than payday lenders. Pawn shops will not check your credit rating, and will not send debt collectors after you if you do not repay your loan. Generally if you are looking for a small short-term loan, pawn shops are a good place to turn to. Pawn shops are happy to lend as little as tens of dollars and as much as tens of thousands of dollars.
What Can I Do at a Pawn Shop?
You have 2 main options at a pawn shop when you bring in your item. You can pawn or sell. If you sell your item, you walk away with money and never have to pay back a loan. However, the pawn shop gets to keep your item. If you pawn an item at a pawn shop, you get a short term loan, and have to repay the loan over a few months, with each payment usually on the 1st of the month. You will get more money if you sell your item than if you pawn it, but you won’t be able to get your item back if you sell it.
If you choose to pawn your item, the pawn shop will give you a pawn ticket that says the item belongs to you. Keep the ticket, repay the loan, and you will get your item back.
What is PawnGuru?
PawnGuru is a website service that connects people who want to pawn or sell their item to local pawn shops.
If you want to pawn or sell an item you own, simply submit your item to the platform. Shops in your area will be notified and will make offers for your item. You usually get an offer within the first 24 hours. If you accept a bid on your item, simply drive over to the pawn shop with your item and pawn or sell it.
How is PawnGuru Like a Peer-to-Peer Loan?
PawnGuru’s business model combines both the pawn shop world and the world of peer-to-peer lending. Like a peer-to-peer loan, you ask for a loan online and different shops make offers on your item. You can then choose from an array of loan offers from different shops.
However, PawnGuru also gets the best of the pawn world by offering you a loan today. peer-to-peer loans take about a week to get back to you with loan offers. PawnGuru will give you a loan offer within 24 hours. All you have to do is accept the loan, get to the pawn shop with your item, and get the loan.
PawnGuru will match you to the best pawn loan that you can find in your town. PawnGuru has access to the shops that want your item and will pay the best prices for it. So in a sense, PawnGuru is decentralized like a peer-to-peer loan.
How Does PawnGuru Work?
Not all pawn shops are identical. Pawn shops are radically different from each other. Some pawn shops specialize in high end jewelry, some pawn shops specialize in TVs, some pawn shops specialize in firearms. Different pawn shops are good at moving different goods. The pawn shop that specializes in TVs is very good at moving TVs and people in the area know that the best place to buy a TV is at the TV pawn shop. The TV pawn shop will give you a higher price for your TV, but might not know jewelry as well. The best place for your item is at the pawn shop that specializes in your item.
But how would you know which pawn shop to bring your item to? Well PawnGuru has you covered there. When you submit your item online, the pawn shops in your area are notified. They will bid on your item, and the pawn shop that wants your item and specializes in your item will reach out to you. You will get the highest price for your loan. You don’t want to risk it, the loan and price difference among pawn shops averages 258%.
Why Use PawnGuru Instead of a peer-to-peer Loan?
peer-to-peer loans require you to have a good credit rating, wait around a week for offers, and ask for a loan amount that is a minimum of a few thousand. Banks and credit unions also require you to jump through those three hoops.
If you do not want or meet all three requirements, you can choose to get a pawn loan.
Do you need a loan for a smaller amount, like $50 or $100 or $500? Do you have an item valuable enough to get more, like a few or even tens of thousands of dollars? Do you need a loan today, as in literally today? Do you have a sub prime credit score or no credit score?
A pawn loan might be for you.
Which Items Get the Most Money From a Pawn Shop?
Pawn shops value firearms, jewelry, luxury watches, and designer handbags the highest. These items last the longest, have the least decline in value, and are in high demand in the marketplace. Pawn shops actually value firearms the most in certain regions.
If you have another item that has high value, low depreciation, and have a high market value, pawn shops will give you lots of cash for it.
What About Payday Lenders Though?
Payday lenders fill the same market space as pawn shops. However, payday lenders do not require collateral to lend on an item. Payday lenders therefore tend to charge higher interest rates than pawn shops and are much worse about getting their money back. With a pawn loan, the worst that can happen is that you lose the item you put up as collateral. With payday lenders, they have the legal authority to garnish your wages and stick debt collectors on you.
Pawn shops will not garnish your wages or stick debt collectors on you.
Do You Need a Short Term Loan?
Submit your item to PawnGuru today! We’ll match you to local shops. The shops will help you pawn or sell your valuables for money today.