The need to access cash or apply for a short term loan happens to everyone at some point, from funding an unexpected business opportunity to bridging a financial gap.
Did you know that you can access same day emergency loans through pawn shop loans?
What is a pawn loan?
A pawn loan offers you a fast route to the value held in assets that you already own, like a luxury watch, jewellery or even fine wine, a classic car or a designer handbag. Authorised and regulated by the FCA, pawn shop loans allow you to borrow up to £2 million, depending on the value of your asset, with very little paperwork or hassle and without impacting your credit score.
It’s a quick and streamlined process, but there are other options that you can consider for fast cash.
What is short term borrowing?
Most short term loan options don’t require you to use a valuable item to secure your loan, but you may be subject to a credit check and the paperwork and bureaucracy that comes with setting up fixed monthly repayments over an agreed term. Short term emergency loans are usually offered by banks, and online non-bank lenders often provide unsecured loans and it can take weeks for the funding to arrive in your bank account.
What is the difference between a secured loan and an unsecured loan?
A secured loan needs collateral to guarantee the loan, often a home or a property, which allows the lender to offer lower interest rates but will most often have higher borrowing limits. This is because the lender can seize the collateral if the loan is not repaid, reducing the risk for the lender.
An unsecured loan, such as a personal loan, does not require any collateral to secure the loan, but it is based on the borrower’s credit rating and financial history. While it means that borrowers do not need to have collateral to borrow against and can offer some flexibility, an unsecured loan typically attracts higher interest rates and lower borrowing limits to limit the lender’s risk.
Pawn shop loans, property bridging loans and bank loans compared
While both loans mean that you can access money, the breakdown of each loan demonstrates that these loans can be very different from each other.
| Pawn Shop Loan | Property Bridging Loan | Bank Loan | |
| Security Required | Secured against luxury assets (jewellery, watches, gold) | Secured against property or land | Usually unsecured but higher value or business loans can be secured and based on ablity to repay |
| Background Checks | Not required | Credit and affordability checks are almost always required | Credit and affordability checks are almost always required to assess the ability to repay the loan |
| Loan Amount | Based on luxury asset value (£500 to £2 million) and LTV up to 75% | Based on property value (£50,000 plus) and LTV up to 75% | Based on creditworthiness (usually between £1,000 and £50,000) |
| Speed of Funds | Same day funding | Typically one to four weeks | Days to weeks |
| Interest Structure | Fixed interest rate, interest is only payable on redemption | Fixed or variable interest rate, often interest is serviced monthly | Fixed or variable interest rate, often interest is serviced monthly |
| Repayment Terms | Flexible, redeem anytime during the six month term with option to renew | Repayment is usually between six and eighteen months | Repayment is usually up to sixty months |
| Risk | Luxury asset used as collateral may be sold if the loan is not repaid | Property or land is at risk of repossession if not repaid | Damages your credit profile, and debt collection is required |
| Regulatory Protection | FCA regulated | Many but not all bridging loans are FCA regulated | FCA regulated |
| Suitability | Asset rich individuals needing short term and fast liquidity | Property owners and developers needing short term finance | Individuals or businesses with strong credit profiles |
| Pawn Shop Loan | Property Bridging Loan | Bank Loan | |
| Security Required | Secured against luxury assets (jewellery, watches, gold) | Secured against property or land | Usually unsecured but higher value or business loans can be secured and based on ablity to repay |
| Background Checks | Not required | Credit and affordability checks are almost always required | Credit and affordability checks are almost always required to assess the ability to repay the loan |
| Loan Amount | Based on luxury asset value (£500 to £2 million) and LTV up to 75% | Based on property value (£50,000 plus) and LTV up to 75% | Based on creditworthiness (usually between £1,000 and £50,000) |
| Speed of Funds | Same day funding | Typically one to four weeks | Days to weeks |
| Interest Structure | Fixed interest rate, interest is only payable on redemption | Fixed or variable interest rate, often interest is serviced monthly | Fixed or variable interest rate, often interest is serviced monthly |
| Repayment Terms | Flexible, redeem anytime during the six month term with option to renew | Repayment is usually between six and eighteen months | Repayment is usually up to sixty months |
| Risk | Luxury asset used as collateral may be sold if the loan is not repaid | Property or land is at risk of repossession if not repaid | Damages your credit profile, and debt collection is required |
| Regulatory Protection | FCA regulated | Many but not all bridging loans are FCA regulated | FCA regulated |
| Suitability | Asset rich individuals needing short term and fast liquidity | Property owners and developers needing short term finance | Individuals or businesses with strong credit profiles |
What is the best emergency loan option?
That’s an excellent question. If it’s an unexpected expense that’s at the crux of the matter, financial decision-making at high speed can feel as if it lacks due diligence. However, if you’re only measuring one traditional emergency short term loan provider against another, you’re likely unaware of many of the benefits that pawnbroking can offer in a loan emergency.
Why do people need an emergency loan?
It could be something as simple as paying school fees without having to access investments. It may also be a straightforward funding stream for an unmissable short-notice business opportunity. A pawn loan is also an incredibly viable alternative to a property bridge loan.
Like a pawn loan, a property bridge loan is short term and is used to span the gap between a property purchase and a property sale. However, a pawn loan is secured against an asset, but a property bridge loan still requires an application and approval process. While these can often be quicker than a typical bank loan, they usually are a more expensive option with higher interest rates and a repayment plan similar to a mortgage.
A pawn loan requires minimal paperwork with no need for credit checks and is often leveraged as a finance option for property developers that need to seal a quick deal.
Pawn loans over other short term loans – what you need to know
Are pawnbrokers FCA regulated?
While most banks and lenders are FCA-regulated, there are still some unscrupulous lenders that leverage borrowers’ unexpected financial pain points.
Pawnbroking and pawn shop loans are authorised and regulated by the FCA, with some pawnbroking brands able to count on hundreds of years of experience in providing emergency lending.
Pawnbroking teams are home to experts who can offer skilled and knowledgeable pawn loan valuations based on live auction prices that can unlock 50%-70% of your asset’s value in moments.
Do pawnbrokers conduct credit checks?
As pawnbrokers are only interested in the asset under valuation, credit checks are simply not carried out with pawnbroker loans.
In addition to offering the ultimate in discretion, pawnbroking loans do not require assessing your ability to repay the loan, as the value held in your item secures your loan. This also means that your emergency loan won’t impact your credit score in any way, even if you fail to repay the loan.
Do pawnbrokers offer flexible repayment terms?
Pawnbrokers exist as urgent loan lenders with a considerable amount of business generated by emergency cash loans.
Pawnbrokers appreciate borrowers’ financial circumstances and can tailor your loan term to meet your needs, although there is a standard fixed term loan period as a guide.
Unlike banks, pawnbrokers are also open to repackaging loan terms if you are unable to meet the original agreement.
In contrast, banks and online lenders’ fixed term repayment schedules offer little room for manoeuvre, with the emphasis on recovering the amount borrowed, plus interest, rather than the borrower’s financial situation.
Does pawn shop lending really offer instant access to cash?
With an asset of value, securing a pawn shop loan is a quick, easy and transparent option. For borrowers who need to get emergency cash, pawn shop loans often guarantee instant access to funds, with the money in your account on the same day, if not within the hour.
Conversely, banks and other lenders have a process that they must follow during the application process, including credit checks, which could impact your loan success, especially if the lender is looking for the best short term loans for bad credit.
