By Steven Davidson
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Money can be hard to come by these days. Businesses are still closed, loan programs have been nearly exhausted, and grants are almost non-existent. The loan programs business owners have taken advantage of may have already run out and cannot be applied for again. If this is you, now is the time to look to less reputable ways to secure a loan. Programs, like Pink Slip Loans, will use your personal property as collateral and give you cash. Those with valuable possessions and a need to supplement their business income may find the programs listed here to be useful. They can be used for any expense and are granted quickly. Keep in mind that most secured loans of this fashion come with their share of detriments, so we have provided the pros and cons of each.
Car Title (Pink Slip) Loans
Pink slip loans use your title ownership of your car as collateral and give you cash based on what your car is worth and how much you still owe on it. Normally, you need to have your car fully paid off, but some lenders may look at what you owe and determine if they are willing to give a loan out. To get this loan, you must be at least 18 years old, provide a government issue ID, have no liens on the vehicle, own the vehicle outright, and have the pink slip or proof of title for your vehicle. These requirements will vary depending on the lender.
Pros
No Credit Check Needed: Car title loans are perfect for people with bad credit. First of all, the loan itself does not require good credit to acquire because your car is all the insurance the lender needs. Lenders are usually concerned with your current credibility rather than the past.
Usually Help Boost Credit Score: These loans can actually help your credit. Making frequent, timely payments on the loan will help raise bad credit if the lender reports to the major credit bureaus. Be sure to check if they do because not all car title lenders do.
Lending is quick and safe: Even before the impacts of Covid-19 became an issue, most title lenders approve loans online. They even allow you to input your information and get a quote so you can compare multiple offers before making a decision. Once approved and accepted by you, the money will be in your account within 24 hours. Online lenders are typically very trustworthy and easy to reach with questions.
You Get to Keep Your Car: During the loan period, you still get to use your car like business as usual. However, some lenders may require installation of a GPS system so they can locate the car should you default.
Cons
You Will Not Get the Full Value of Your Car: Car title loans can be for anywhere between $100 and $50,000, but higher amounts demand higher value cars. It is typical for a lender to offer somewhere between 25% and 50% of the value of your car, granted it is fully paid off. This may seem like a scam, but it is about what the resale of your car would be if you took it to a dealer and you still get to drive your car.
High Interest Rates: These loans usually come with massive interest rates, upwards of 25% per payment period. This translates to about 300% APR, or Annual Percentage Rate. These terms are negotiable with most lenders and there are plenty to choose from. Be sure to do lots of research to get the best offer. HERE is more information about the interest rates.
If You Default, You Lose Your Car: No surprise here. Using your car as collateral for a loan gives the lender the right of repossession. Lenders may install a GPS or starter interrupter device, which impairs the ability to start the vehicle, to ensure you can’t withhold it from them. Missing even one payment can sometimes mean your car is taken away, which is why a plan for repayment is important to have beforehand.
Car Usually Needs to be Less Than Ten Years Old: Not all lenders are willing to give a loan for a car that is over ten years old because they have depreciated so much or could come with a list of problems. TRUE Financial is a lender that accepts older vehicles, so visit their site to see their offers.
Must Have Decent Equity in Your Vehicle: Most title lenders want you to have the car mostly, if not all, paid off. Those with a lot of future payments to be made on your vehicle should avoid this option.
Overall Analysis
Pink Slip Loans should be considered a last resort for small business owners that have nothing left. This loan is difficult to manage with such high interest rates that using all the money just to stay afloat may put you in a worse situation. With that being said, it can be a good option for those with bad credit but enough capital to keep up with the payments. Using it wisely is important, especially if your business is still completely closed. Keeping up with the payments will raise your credit score and allow you to apply for larger loans.
To get started with a Title Loan or learn more information, click HERE.
Jewelry or Other Valuables Collateral Loans
Many of us have jewelry or other valuables that we hold dear and don’t want to sell them, whether it be an heirloom or wedding ring. Even without selling them, they can still be used to get quick cash. There are many ways to get a loan with valuables, but the best way is through a secured jewelry lender. They offer more value than pawn shops and better interest rates than banks. Even during Covid-19, most of these lenders are still open for business. Secured lenders are experienced with these items and provide a quicker, more reliable evaluation as well. Since secured lenders are seen as the best way, we will be examining them for the pros and cons. For information on why they are the best option, click HERE.
Pros
Loans are Usually Low Interest: Secured lenders offer low interest rates on your valuables. Rates can be lower than most traditional bank loans and shorter terms mean less overall interest to be repaid.
No Credit Check and Won’t Affect Credit Score: Lenders do not report these loans to major credit bureaus, so a default on the loan does not hurt your credit.
All Kinds of Jewelry and Valuables Accepted: This one does vary by the store. If you don’t have any of the valuables they are specifically looking for, you can always bring something in and see if they will take it. Typical items include engagement rings, fine jewelry necklaces, estate jewelry pieces, gold and precious stone pieces, and even broken fine jewelry pieces.
Option To Extend: If you cannot come up with enough money to pay the whole loan by the end of the term, most lenders will extend it for another loan period if you just pay the interest due. For small business owners, this makes it easy to maintain the loan and use the money freely.
Lenders Protect the Items: Some lenders will collaborate with local law enforcement to record all the items brought in and ensure they are not stolen.
Cons
Most Lenders Require Holding the Pieces: Unlike Pink Slip loans, you will have to give your possessions to the lender to get the money. They are secured in a vault so they will be safe, but a default could mean immediate release of your items.
Lenders Are Interested in Your Default: These loans will usually give you about 60% of the value of your items, so if you go into default, they actually profit more than if you pay off the loan. Defaulting on the payments gives them the green light to sell your collateral and turn a profit.
Usually a Short Term Loan: Loans range between 30 and 90 days. This is a short time to repay a loan and use the money effectively. Fortunately, most lenders allow the loan to be extended if you just pay the interest owed at the end period.
Failure to Pay Means Your Valuables are Gone: If you do not ask for an extension of the loan, your valuables will be put up for sale. Even missing one payment could send your stuff to the showroom.
Overall Analysis
This is a low risk option for small business owners with valuables they are able to use. The low interest rates as well as extensions available for the loans make it easy to repay while giving a quick lump sum of cash right away. This does require having valuable items they will accept as collateral and the willingness to possibly let those go, so evaluate whether they are worth using.
Pawn Shops
According to ABC, pawn shops actually fall into the essential business category if they are licensed, by the banking commission, government, or both. Even given this, they should be considered an absolute last resort when it comes to collateral loans. Pawn shops work by taking your personal items and giving you upfront cash with terms for repayment if you want to get the items back. Default gives them the right to sell what you have pawned. There are a few upsides, but pawning for the most part is not a super reliable way to get a loan.
Pros
Quick Cash: Most items can be appraised in store and be paid for that day.
No Credit Checks: Those with bad credit can get a loan quickly and easily. No credit check means your score will not take a hit from checking either.
Low interest rates: Not every shop has this on their resume, but many boast lower interest rates than banks. Be sure to discuss the terms with the employees.
You Can Pawn Pretty Much Anything: Pawn shops are not picky. They will take anything of value so long as it is in decent condition or completely outdated. Plus, you can get any item you pawn back if you can repay the loan.
Cons
Debt Cycle: Though interest rates are low, pawning can be dangerous if you cannot repay before the loan period expires. Most shops allow for extensions to the loan, but they can also require higher interest payments or change any part of the contract they wish. This is because there is no formal contract signed between the parties.
Borrowers are Liable for the Full Amount: If your items do not sell for the value of the loan, you may be responsible for paying off any remaining balance. Usually, item sales cover the cost, but this is a warning just in case it does not.
The Loan is Usually Only a Small Percentage of the Value: If you have seen Pawn Stars, you know that lowballing an offer is a common occurrence. You will likely only get a fraction of what your possessions are worth, so they can turn an easy profit if you fail to pay the loan.
Overall Analysis
As stated above, this should be a last resort. It would be more efficient to sell the items you are looking to pawn. Unless you are not willing to part with some of these things, selling anywhere else would usually be a better option.
For a more detailed look at pawning and related topics, click HERE.
Wrap Up
When it comes to pawning smaller personal items, whether through a pawn shop or certified lender for jewelry, it may be better to just sell your items. Websites, like eBay and
Craigslist, make it easy to get rid of unwanted or unneeded things quickly and easily. In tough times, cleaning out the garage and selling whatever you don’t need may be better than using it as collateral. We are still figuring out all the ways to return to a sense normalcy. Sacrifices will have to be made by many, which can look like handing over some belongings to ensure there are doors to reopen when the time comes.
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