Car Pawn - What You Should Know Before You Apply

What can you do if you need cash urgently, but don't have good credit, or think that getting a bank loan would be a hassle? A way out is to pawn your car.

In a car pawn, a car is used as collateral to receive a loan. The owner of the car gives his title to the lender as assurance that he will pay back the cash advance. The car is held, along with the title, by the lender until the loan is paid. Also, in a car pawn, the amount lent is determined by the resale value and condition of the car. Easy enough, right?

But it's important that you know what you're getting into before you sign on the dotted line. These are some things you should know before pawning your car:

Bad credit will not necessarily be a deterrent for a person applying for a car pawn loan because the loan will be covered by the value of the car. However, it is important to be realistic and assess your ability to repay the loan within the stipulated time. If you are not sure, don't pawn your car. Always remember that you stand to lose your car for any default in payment.

Generally, a much higher interest is charged for a car pawn loan than a banking institution would charge for a loan.

Not all vehicles are eligible for a car pawn loan. If the car has high mileage, poor engine performance, or damage to the external body, this will affect the loan amount offered.

No loan shark will hound you for the money you owe. However, if you don't pay the money, you will lose your car. It's that simple.

You stand to forfeit the car if the car pawn loan is not paid, even though the actual value of the car may be higher than the amount you owe.

Alisha Delphi holds a degree in Economics and Commerce from USC. She started out as a financial advisor with a bank and has moved on to become a loan consultant with more than ten years of experience. Her key areas are auto title loans, auto pawn and fast cash loans.