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Wednesday, April 20 2022
What's the Difference Between Payday Loans and Pawns?

Sometimes an unexpected bill or emergency can throw us for a loop, leaving us struggling to pay our regular expenses. A quick short-term loan can help you meet your expenses. Two popular choices are pawn loans and payday loans, but which is better? Let’s look at both types of loans and the benefits and drawbacks of each one.


What is a Pawn Loan?

Pawning is the act of putting up an item of value as collateral for a loan – known as a pawn loan. You can pawn a variety of items including jewelry, electronics, and even some antiques. When you enter into a pawn loan agreement, the pawnshop agrees to loan you an amount that is a percentage of what the item or items are worth. If you repay your loan within the agreed timeframe, you receive your item(s) back.


What is a Payday Loan?

A payday loan is a short-term loan that you pay back on your next payday. Typically, a payday loan company will determine the maximum amount you can borrow between pay periods and you can take a loan up to that amount. On your payday, the loan company your bank account for the loan plus interest charges. You usually have the option to pay the loan before your payday to avoid the automatic draft to your account. Note that payday loan companies may require that you have direct deposit in your bank account, as this is how they “guarantee” you pay back the loan.

Which Loan Is Right for You?

Choosing between a payday loan and a pawn loan depends on your needs and what you have available to you.



Pawn Loan

  Payday Loan

Short Term



Flexible Payment Options



Requires a bank account



Can be paid back early



Requires collateral



Requires pay stubs/bank statements




Both types of loans have their advantages and disadvantages as you can see above. If you’re willing to have the loan company draft your bank account, a payday loan seems like a good option, as you don’t have to put valuable items up for collateral. However, what happens if you can’t repay your loan?


In the case of a payday loan, if you can’t repay your loan, your bank account is drafted anyway, leaving you with overdraft fees. If your bank pays the draft, you must pay the negative balance on your account (which will take away from your next paycheck). If your bank doesn’t pay the overdraft, the payday loan company will turn your loan over to a collector, where it then goes on your credit report.


With a pawn loan, however, if you can’t repay your loan, the pawnshop simply keeps the item(s) you pawn and puts them up for sale in the shop. While this means you don’t get your item back, it also means no collection calls and no defaulted loan on your credit report.


Why You Should Choose a Pawn Loan Over a Payday Loan

Flexible payment options are the number one reason you should choose a pawn loan over a payday loan. With a pawn loan, you and the pawnshop can negotiate the terms of your loan, including how long you have to pay. This means that you can budget payments over time to ensure you pay your loan and get your items back. With a payday loan, you have no choice but to pay your loan back on your payday. For many people, this means that you don’t have that money after your next payday, which leads many people to take out a new payday loan, often for several pay periods until they can catch up again.


Do you need a loan for an emergency? Do you just want some extra cash? Contact us today to discuss your needs. We’re here, serving Philadelphia and surrounding areas.


Posted by: AT 11:52 am   |  Permalink   |  Email

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Cash Express  • Philadelphia Pawn Shop

731 Chestnut St. Philadelphia, PA 19106 -  (215) 922-1560