Car title loans and payday loans are similar in theory, but there are differences that come into play when you look at how much money you will pay. Did you know the average credit score is now approaching 700? That’s right, as the economy is improving more and more Americans are fixing their credit and seeing their score improve. This can be a great thing if you’re looking for a personal loan. Most banks will give you a personal loan, otherwise known as an installment loan. Banks and credit unions provide funding if you have good credit and want to pass on a car title loan. You will also need to show an ability to pay it off based on a steady job history. While this is all great news it doesn’t mean anything to the rest of the population. Most applicants pay their bills on time, but have bad credit or no credit history. In contrast to the scenario above, consumers with bad credit have far fewer options if they need an installment loan or an online personal loan.
Get A car title loan instead of a payday loan if you have a paid off vehicle
One viable option for people that fall into this category is an auto title loan. We’ve all heard the stories of how people can get caught in a long term debt scenario. Borrowers end up paying back money in interest and other fees with an auto title loan. Don’t be that person! If you feel that a title loan is right for you, make sure you follow the terms of the loan, so you don’t end up paying back more than you need to! Of course, you need to have a car that’s free and clear. It will need low mileage to be approved for a loan with a car title lender. But there aren’t many other financial requirements besides that. That’s where the good news comes into play. With vehicle equity financing you don’t need good credit. In fact most companies that offer online title loans couldn’t care less about your credit. They want to see that you have equity in your car and the ability to pay off your online loan by making set monthly payments over a period of time. The Government doesn’t have interest calculators or resources to help you map out short term lending payments. But you can use their Federal Student Loan Interest Calculation resources to get a feel for the difference in interest with each service.
There are other differences in play when you compare loan choices. One drawback of an online auto title loan is the fact that you’ll pay much more in finance charges on your loan. With a payday loan you pay a lot of finance charges up front. But the finance term will only last for a few weeks Most car title loan companies in our online director have interest rates that far exceed 20%. Lenders will argue that rates need to be that high because of the risk of default. It goes without saying but do all you can to find a reputable lender with interest rates and fees that are in line with industry standards. Another difference between these two types of loans is that auto title loans are tied to your car. With an auto title loan you’re using your car as collateral, and you must pay your monthly payments on time. If you fall behind on your payments you run the risk of having your vehicle repossessed! With a normal bank loan you have no collateral backing up your promise to pay. These are just some of the differences between the two types of loans. As we always say, if you can get a bank loan you should go with that option. If you don’t have that luxury available then you need to look at other scenarios. Using the equity in your pink slip can be difficult as you need to drive a car each day. These types of financing have their drawbacks and should only be used in a financial crisis. But they serve the purpose of providing you with cash when you need it most.