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29 Jun 2018 | Written by Daniel Dewitt

What is the Difference Between Installment Loans and Pawning Valuables?

Though they occupy a similar niche in the financial world, installment loans and pawn loans are two very different ways of getting emergency cash. Both are viable options for those who are facing an unexpected expense or a financial challenge, but they differ in several important ways. The fundamental difference between the two lies in the way the loan is secured and how the loan is repaid.


If you’re wondering whether to get an installment loans or head to the pawn shop for the extra cash you need, this guide has the answers you are looking for. Here are the key differences between the two.

Which is Which?

As the name suggests, an installment loan is one where you pay back the total amount of the loan over time in several pre-agreed payments. Pawn loans, on the other hand, work by handing over your valuables to the pawn shop. The value of the item you’re pawning is what decides how large a loan they’re willing to give you. People often pawn items such as furniture, jewelry, electronics, and collectibles, with each fetching a different amount.

Credit or Collateral?

With an installment loan, the lender will check your credit history and confirm your income before making a decision about whether to offer you a loan. These two factors will form the crux of their decision, and determine how much they’re willing to loan you and the terms of the loan agreement. Your credit score will essentially determine how much the lender “trusts” you to pay the loan back, but you also want to make sure you  trust your lender, too.

Unlike an installment loan, a pawn shop does not check your credit before granting you a loan. Instead, the valuables you hand over to the pawn shop are used as collateral. In essence, a pawn shop does not need to “trust” a borrower as much, since they can always resell the items used to secure the loan to recoup the entire amount of the loan, if not more.

Paying It Back

Paying It Back

The other important difference between the two types of loans is in the terms of how they’re repaid. The terms of how much and how quickly you’ll need to pay back in an installment loan vary from loan to loan, but are generally over the course of several months. You’re given enough flexibility to pay it back over a period of time, instead of in one lump sum.

Pawn loans, on the other hand, are short-term loans that must be paid back in a single lump sum. If you pay late, you gamble forfeiting the valuables you handed over to the pawn shop to secure your loan.

Decide Wisely

Ultimately, the answer here comes down to weighing the pros and cons of both types of loans. Installment loans are less of a risk than pawn loans but also depend on your credit score. To get a decent pawn loan though, you need to own something worth pawning in the first place. Neither type of loan is worse or better than the other, but each has distinct advantages and drawbacks.

If you decide an installment loan better fits your situation, you could quickly and conveniently connect with a nationwide network of licensed installment loan vendors by completing a simple online request form. Cash amounts of up to $2,600 are available today, and you don’t have to part with your valuables.

Loan Agreement

Daniel Dewitt