What is Collateral Lending?

Modell Loans

Pawn shops are collateral lenders, meaning a pawnbroker will give you a loan based on the value of collateral you own. You provide the collateral to secure the loan and the pawnbroker gives you the cash with the promise to return your collateral once you have repaid the loan.

When you take out a pawn loan, or collateral loan, you are promising to release your collateral to the pawnbroker if you should not be able to repay your loan. In turn, the pawnbroker must return your item of value once you have repaid your loan plus the interest and other fees that are regulated by state and other local laws, depending on the location of the pawnbroker.

Collateralized pawn lending is convenient for the borrower because the process is so simple. Unlike traditional lending there is no credit check required. A pawnbroker is not concerned with your credit history, because they are holding on to an item you have provided that is of equal or greater value to the dollar amount they have lent to you.Therefore, whether you pay your loan back or not they do not lose money. This means that in order to take out a pawn loan you simply bring in your valuable item or items and a photo I.D. and you can get cash the same day.