Pledge lending is one of the most traditional ways to quickly get the money you need. All valuables such as watches, jewelery and cars can be seized. Cars in particular are a popular pawn due to their high material value. They are also particularly worth pledging because, unlike other objects, they can be used to take out loans of well over 50% of the pledged value.
What is pawn lending and how is it carried out?
The pawn shop is one kind of credit, for which the loaned object serves as security for the pawn shop. By law, pawnshops are not allowed to charge more than 1% of repayment installments. However, fees are common, which at around 3,5% to 5% are well above the borrowing rate, so that the effective annual interest rate for pawnbrokers is higher than for any other loan. The fees are expenses for storage, transport and measures to secure the storage site, because pawnshops attract criminals. After the delivery of the pledged object, the customer receives a mortgage bond issued for the object.
pawn shops like that Vehicle pawn loan house Wittlich OHG are legally obliged to give customers who want to borrow their car at least three months to redeem the deposit. Many pawnshops grant their customers a longer period of time or allow earlier redemption if desired. If the customer does not repay the loan by the end of the contractually agreed period, the pawnbroker is entitled to sell the valuable item. This process usually takes place at an auction. The pawnbroker is obliged to pay the customer back the surplus.
The advantages of pawnbroker
The pawn shop is a quick and unbureaucratic way to get a loan. Since the pawned item serves as security for the pawn shop, the customer who wants to lend on his vehicle is spared the Schufa query and creditworthiness determination. In many cases, the customer has the loan amount after just a few minutes.
Flexible contract terms are common in the industry and loans are available for cars with a loan amount equal to 80% of the vehicle. Those who have difficulties repaying the loan often find providers who offer an emergency exit with a purchase option.
The disadvantages of pawnbroker
Due to the capped debit interest rate, the nominal interest rate is manageable and cheaper than with other loans like this popular car loan. However, the fees for all costs associated with transport and storage increase the effective interest rate many times over. The seized valuables are not available during the loan term, which is a major practical problem, especially for cars, so that car seizure is only recommended for a second car.
How do I find a good pawn shop?
When comparing providers, the fees for transport and storage are particularly relevant, while the debit interest rate hardly differs from provider to provider due to the cap. It is therefore important to pay attention to the amount of the fees, but also to the consideration. The better the storage facility is secured, the more securely it is protected against burglary. Alarm-secured vaults with video surveillance are considered ideal in this respect. The room climate should also be such that the value of the stored item is not impaired.
The storage facilities should therefore not exhibit high humidity and, in the worst case, mold on the walls. If desired, the customer should have the lender show him the location of the storage. Another criterion for the provider comparison is the flexibility granted with regard to repayments and whether the lender offers the alternative option of resale. The lender should be a member of the Central Association of the German Mortgage Loan Trade e. V. and play open cards with a transparent calculation of fees.
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