If you are in a financial crisis and require some extra cash apart from your investments (if any), the first and foremost idea that shapes up in your mind is to sell some item that will fetch you the required amount. It might be some expensive piece of antique, jewelry, heirlooms, etc. However, you need to give a thought to whether you prefer selling the item or pawning the same. The latter allows you to get money for the item, and yet retain its possession. The article below enlists the difference between pawning and selling.
- It is more like a secured loan.
- You will basically be offering your jewelry to the pawnbroker as a security for a few months (as agreed upon by both parties).
- You have to ensure that you pay the broker within the specified time limit. If you don't, the broker has the complete right to take possession of the jewelry and sell it off.
- The terms and conditions vary from one party to another.
- In a sale, one party loses the possession of the item for sale, in exchange for some money.
- The person paying the money acquires full ownership of the product, which he has purchased and can use it for whatever purpose he wants.
- If we consider an example of the sale of jewelry, the seller accepts a certain amount of money in exchange for the jewelry.
- The seller loses the jewelry and all the rights over it forever, while he takes the money for it.
Pawning Vs. Selling
|Ownership||A person pawning it doesn't lose possession unless he defaults on the payment.||The person selling something loses the ownership.|
|Status||If you pawn your stuff, you're technically a debtor of the broker and owe him money.||When a sale is completed, there is no relationship between the buyer and the seller.|
|Time Constraints||A pawning agreement is for a period of time, but can be extended.||There is no binding of time in a sale.|
|Interest||The person pawning his possessions needs to pay an interest as agreed with the broker.||There is no interest paid in a sale.|
|Money||The broker will very often lend you less than what the goods are worth and you have to pay interest on it as well.||More often than not, you will get a higher amount for sale than you'd get by pawning, provided you wait for the right buyer.|
|Outlets||Pawnshops are regulated by the federal government. You can pawn your items at pawnshops and with personal brokers. You can be sure that they will do everything to keep your item secure.||Pawnshops do not buy jewelry or even have related contacts. You have to depend on outlets, like online selling, specialty stores, jewelry shops, auction houses, and consignment stores.|
|Which to Select When?||As mentioned, pawning is more like a collateral loan. You own the asset and get quick cash. Therefore, if your asset is something whose value may increase with time, pawning is the best option.||Once you sell an item, it is lost forever, even though you may get substantial cash. Therefore, prefer selling the item if it is slightly damaged and may not benefit you in the long run.|
If you are a novice, you need to be very, very cautious about pawning or selling. Do not sell assets that have a long-term value. Personally, pawning items is always better than selling them, especially when you want money urgently and are willing to pay it back. It doesn't make sense to simply sell a valuable piece of jewelry when you could as easily pawn it and then get it back. But then, you need a good, trustworthy pawnbroker as well. If worse comes to worst, you always have the option of selling the item.