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Auto Title Loans vs. Payday Loans
Is There a Difference and Which One is Better?
Is There a Difference and Which One is Better?
With the variety of short-term loan options available in most states, it can be quite confusing when shopping for the best way to get
a cash advance fast. While both of these options generally are not the recommended due to their high interest rates and quick payback
periods, it is still important to understand the difference between the two, if you are ever in need of a short-term loan.
Auto title loans are cash loans given to car owners based on the equity they have in their automobile. Typically, to be eligible for a title loan you must own you car outrights and it must be free and clear of other liens (loans). The loan amount you receive is usually based on the minimum value of your vehicle, meaning most likely you could privately sell your car for more money. The due date to payback these loans are typically 30 days from the loan date.
Payday loans are also cash loans given to borrows, but are based on income, not on an assets. The loan amounts are typically much lower than auto title loans, with amounts ranging from $250 to $1,500. Payday loans are typically due by your next scheduled paycheck.
While both of these loans have short payback periods, in MOST cases the lender can work with you for a more flexible payback plan, but this does mean they will be tacking on additional fees and interest on the balance of your loan.
Most of the times title loans are a better option than payday loans because you can receive a higher amount at a lower interest rate; however if you do default on your auto title loan, the lender can repossess and sell your car to recoup the costs of your debt. If you default on a payday advance, since there are no assets, usually the lender employs private collection parties to recoup personal loan costs.
If you are in need of some fast cash you need to make the right decision. We recommend you first apply for more traditional lines of credit such as a credit card or a fixed interest rate personal loan through a traditional financial institution. But if you are denied due to bad credit, make sure you research and compare various payday loan and auto title loan options before making a contractual decision.
For tips on shopping for loans, click here.
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