In order to clarify the nature of this topic, first we must identify what is considered a valued item for exchange, or collateral. It is a pertinent part of the loan process, and it provides security, value, and motivation for the borrower to pay off the loan promptly, or not? Some might say why wouldn't they be in a hurry? Well, often times these heirloom were just diamonds in rough if you will. In other words, covered with dust in a basement or attic, serving no practical purpose outside its inherit value.
If you borrow money against the value of your house, like with a second mortgage, you are then motivated to pay back that loan to keep the house you used as collateral. The borrower voluntarily puts up their values as secure collateral against the pawn shops cash loan, and understands the terms of the loan. This at times could mean giving up ownership of whatever collateral has been put in place.
The average payday loan however, will require a pay stub and bank information to process the loan, and if not paid, the loaner can extract the money from a following pay day, only perpetuating the cycle of having to pay back the deficit.
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