When you are strapped for cash, it is easy to think about the quickest and easiest ways of getting a money to survive between two paychecks. In that time most people turn to the payday lenders for payday advance loans and title loans because it is the most convenient method to put money in your pocket. Some financial experts wouldn’t agree because they carry higher interest rates and bigger chance you will end up in a ‘debt trap’ and some will say these options are better than alternatives. To give you the details of each of the option, let’s first dig into the basics. After all, having a basic financial education without the university background can help you to swim around the financial traps more effectively.
Getting a loan does not mean you are financial incapable or dependent. This is the first thing you have to make terms with. Unforeseen life costs, sudden car repairs, necessary home investments or just life in general are all legitimate arguments for a help from a bank or a lender and there is no reason why you should feel inadequate or powerless when choosing some of the available loan options. What is crucial is choosing the right loan option. The seemingly small difference between them can actually have a huge impact on your finances and future reliability.
People who are in a major necessity for a financial funds either don’t have time to go over a lengthy procedures of getting a long-term loan or have a bad credit score which prevents them from being approved. But they can still be entitled to get an auto title loan or payday loan which are both heavily disputed in the public for their high interest rates, unfavorable terms and extortionate collection tactics. Both of the loans have some overlapping features and similar distinctions which borrowers should be aware of.
To read about the payday loans, check out our article on how and when to use them. Following is an overview about car title loans and their comparison with the payday loans.
The same as payday loans, title loans are also small amount of money borrowed for a short period of time which you need to repay with certain fees. But unlikely to the payday lenders, title lenders hold your vehicle’s title as collateral. They assess the value and quality of the vehicle and usually lend up between 25 to 50% of that value. Basically, it is the exact amount of money you can get with a payday loan expect one difference. Depending on the amount, the loan can be settled all at once or in multiple installments during a certain period of time. To be approved for this type of the loan, you need to have a clear legal ownership over a car and no prior or current liabilities. If you’re unable to repay your loan, you might lose your car. If the lender is mild, he might offer a new 30-day term with a new finance and penalty charge. But if you are not that lucky, you can say goodbye to your car which the lender will use to pay off your debt. So why you should even consider that options?
Classifying one or the other as "better" is somewhat hard as both of the options are usually aimed at the similar type of borrowers and with a similar withdrawal conditions. Also they possess the similar high risk when you don’t pay either of them on time. Nonetheless, obtaining the car title loan seems a slightly better idea when it comes to these three points:
In the end, you have to ask yourself is the auto title loan a right choice for you. If you urgently need some money which is higher than your weekly income, than the title loans can be a better option compared to the payday loan. Title loans are best for the emergencies and situations where:
For more information about the payday loans contact our customer service.