Payday Loans and Car Title Loans: Is There a Better Choice?
If you’re facing financial difficulties, you may be seeking a loan option that could help you in this situation. However, during your search, you find two loan types that interest you out of all the available choices: a payday loan and a title loan. But which one could favor you more?
Take a look at what each loan option offers and their differences before making a final decision.
Payday Loans
Payday loan lenders often offer short-term loans that borrowers must repay within their next payday. If you only need a loan to cover a brief unexpected expense, this loan option may be right for you; yet, there are some things you should consider. One, a lender might only give you a loan amount of $500 or less, which could be bad if you need more money. Secondly, payday loans do not require collateral, which makes these loans unsecured. They could have hidden fees and high-interest rates that can make the repayment process difficult to cover. There are also additional fees if you make late payments.
Thankfully, in some states, payday loan lenders can offer extended payment periods if you can’t repay your loan on time. These extended repayment plans mean you’d only have to pay what you owe, and lenders cannot force you to borrow funds again. Unfortunately, that would leave you stuck in an endless cycle of debt that could be challenging to escape.
Auto Title Loans
A title loan, also known as a pink slip loan, is a loan type to utilize when you have equity in your car. Title loans may let you access your vehicle’s positive equity and use its title as collateral for the loan. That means you could secure the loan by simply using the title to your car! Generally, a car title loan will allow you to access up to 50% of the equity in your vehicle; yet, this amount depends on your vehicle’s available equity, your income, and the state you reside in. You might acquire anywhere from $1,000-$10,000! Use a title loan calculator to see how much.
Keep in mind that a title loan lender will place a lien on your car’s title until you have repaid the loan. Once you finish the payment process, the lender will remove the lien from the title. However, if you start to miss payments and fail to pay an auto title loan, lenders can repossess your car and sell it to recover the lost amount. But most title loan lenders prefer to avoid doing that since arranging a repossession could be a hassle.
Payday Loans vs. Title Loans: Which One Should You Choose?
Now that you’ve read about each loan type, it’s time to decide which loan is best for you. The answer to that question depends on the needs you have at the moment. Do you need a loan for a short period and with not a lot of cash? Perhaps payday loans could serve you better in that regard. But don’t forget how you must repay a payday loan within your next paycheck, typically in under two weeks or less. A car title loan could benefit you if you need more money and time to cover an emergency.
Unlike payday loans, a title loan could offer lower interest rates, which could help save you a lot of funds in the long run. Although a title loan lender can repossess your car if you miss payments, you could always refinance your loan until you complete the installments. In addition, if you inquire about a ChoiceCash title loan serviced by LoanMart, you could reap the advantages of payments that may decrease, zero prepayment penalties, and even higher loan amounts!
Just think about your current financial predicament and what works for that situation. Each loan type has its pros and cons but could fit whichever crisis you need to cover. Make sure you speak to lenders from both loan types to learn about them and determine which suits you best. Once you decide, you could call your local lender and apply for the emergency funds you need right now.