Running short on cash usually means that you will need to get some quickly. This may leave you with two choices, especially if you do not have good credit or a friend to lend you the money: a title loan or a payday loan. Here is what you need to know when it comes to making a choice between title loans vs. payday loans.
Both of these types of loans are considered to be short-term. A payday loan will usually need to be paid back at your next payday. A title loan will often let you have up to 30 days before having to pay it back. The interest rates on both of them are usually higher than what you would pay for a traditional loan.
These two types of loans also do not require the borrower to have good credit. In fact, lenders of these loans will not usually even check your credit score, which can make it appealing to someone whose credit is less than ideal.
Car Title Loans
In order to obtain a car title loan you will have to surrender your title to the lender until you repay the loan in full with the interest. You need to know that the interest on a title loan can be very high. Bankrate says that the interest rates may be as high as 300 percent – and this is probably average! Some title loan lenders will ask for a duplicate set of keys, and a few might even put a tracking device on your car; and it may be able to disable your car if your payment is not on time.
In order to get a title loan, you would need to have an ID, proof of your current address, and proof of being employed. Your car’s title also must be free of all liens.
If you do not pay the title loan back, with all the interest, you may lose the car, and all the money you have invested in it, says the Federal Trade Commission. A few states now have laws that require the lender to pay the consumer the difference between the debt owed and the sale price.
A payday loan is altogether different. It does not have nearly as high of an interest rate, although 30 percent would be common. You can apply online and do not need to surrender the title to your car. If approved, the money is sent to your bank account, and then automatically withdrawn from there on the due date.
If a payday loan is not paid on time, you will be recharged the full amount of interest for each pay period. Basically, this means the full amount is rolled over, says Purdue University.
Whenever you need quick cash, you always want to read the fine print before signing anything. Shopping around for a better deal can yield lower interest rates and better terms. It is not necessary to sign on with the first lender that comes to mind.