If you need funds urgently, a loan may be the solution. Both pawn loans and payday loans are faster and easier to obtain than bank loans.

However, it’s worth considering why pawn loans are better than payday loans in Botswana. Typically, they’re less expensive and much less risky.

In this article, we look at:

• How payday loans work
• Pawn loans versus payday loans
• Problems with payday loans in Botswana
• Why pawn loans are better than payday loans
• How to get a pawn loan in Gaborone

How payday loans work in Botswana

As the name suggests, payday loans are short-term loans that need to be repaid in a very short amount of time, usually at your next payday.

The concept is designed for people to essentially get an advance on their salary and then pay off the debt using their next salary.

These loans often require direct access to your bank account so the lender can confirm your income from your deposits. After all, not everyone gets a monthly salary and payslip.

Comparing pawn loans and payday loans

In comparison, pawn loans are secured by pawning an item of value that you own. This item then secures the loan and dictates how much you can borrow.

The loan doesn’t require access to your bank account like a payday loan does. Neither does it require any information about your income because the loan is only connected to the asset.

This is why the lender will take temporary possession of the asset for the duration of the loan. The asset it returned to you as soon as the loan is repaid in full.

Problems with payday loans in Botswana

Payday loans have a bad reputation for good reason. These types of lenders often prey on desperate people and use high interest rates and unscrupulous practices to trap people in an endless cycle of debt.

Some notable issues with payday loans in Botswana include:

• The annual percentage rate (APR) or interest on payday loans can be as high as 300% or even 400%.
• With access to your bank account, lenders can collect repayments directly from your account, which could leave you short if that money had another purpose.
• Payday loans often have many hidden fees and finance charges that you might not be aware of if you don’t read through the fine print.
• It’s not unheard of for payday lenders to use aggressive and harassing tactics to collect the debt, including verbal threats, spamming calls and demands for court appearances.
• Borrowing against your next paycheque can easily create an endless loop where you keep borrowing money to make up the shortfall caused by the first loan.

Reasons why a pawn loan is better than a payday loan

These are the key reasons why a pawn loan is a much better option than a payday loan when you need access to a quick, short-term loan in Botswana.

Zero risk to your bank account

Payday loans often require you to disclose sensitive banking information and may even require your online banking information, so they can track your spending to assess your eligibility.

This access presents a security risk, especially if the lender doesn’t protect his or her data.

No garnishing of wages

Unlike payday loans, pawn loans aren’t connected to your monthly pay. Even defaulting on the loan won’t put your income at risk.

This means your ability to support yourself and your family and cover monthly expenses such as groceries is never in jeopardy.

Lower interest

Pawn loans carry a higher interest rate than most traditional bank loans, but they’re still much lower than payday loans.

They often charge exorbitant interest rates because these loans are unsecured and often unregulated.

No penalties or hidden fees

A common issue with payday loans are hidden fees that aren’t disclosed upfront and penalties for early settlement.

Pawn loans have a transparent application process with no hidden costs or penalties that crop up later.

Getting a pawn loan in Gaborone

Lamna Botswana offers short-term loans in Gaborone that are secured by a pawned asset. You can use a range of valuable assets including vehicles, art, jewellery, gold, luxury watches and antiques.

We don’t do credit checks and there’s no need to disclose your income to apply. The loan also has no effect on your credit history. Our application process is quick, transparent and completely discreet.

Payday loans in Botswana may be tempting but they carry a lot more risk than a pawn loan from Lamna.

To learn more about pawning assets to secure a short-term loan, contact us on 71 388 088 or start the application process online.