Car title loans and payday loans are similar in theory, but some differences 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 great if you’re looking for a personal loan. Most banks will give you a personal loan, 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 be able 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 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 in 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 repay the 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, 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 free and clear car. 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. 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 can pay off your online loan by making set monthly payments over time. The Government doesn’t have interest calculators or resources to help you map out short term lending payments.
There are other differences in play when you compare loan choices. One drawback of an online auto title loan is that you’ll pay much more in finance charges on your loan. With a payday loan, you pay a lot of finance charges upfront. But the finance term will only last for a few weeks. Most car title loan companies in our online directory have interest rates far exceeding 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 align with industry standards. Another difference between these two types of loans is that auto title loans are tied to your car.
Car title loans don’t always come with hefty fees. Take some time and choose a quality company.
With an auto title loan, you’re using your car as collateral and must pay your monthly payments on time. If you fall behind on your payments, you risk 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, you should choose that option if you can get a bank loan. If you lack that luxury, you must look at other scenarios. Using the equity in your pink slip can be difficult as you must drive a car daily. These financing types have 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.