Title Loans Vs Payday Loans
It’s inevitable. At some point in life, most people run into the too-much-month-at-the-end-of-the-money problem. Two of the most common ways to solve this problem are title loans and payday loans. Both types of loans have their advantages, such as offering you quick cash with very little hassle.
However, depending on your needs, one type may serve you better than the other. The purpose of this post is to teach you about both types of loans so that you can make an informed decision about which type of consumer loan you should get.
What are Auto Title Loans?
These types of loans allow you to use your car or truck’s title in order to get a short-term loan. In general, most loans require some sort of collateral. Admittedly, this collateral may be a good credit score. However, most people who want to take out a loan against the title of their car often don’t have the credit score they need in order to get a signature loan.
That’s when they seek out a company like Bay Area Title Loans. (That’s us.) Companies like ours allow people to trade a physical form of collateral – in this case their car or the title to it – for money. This works well for a couple of different reasons.
So Why Should I Borrow Against My Car’s Title?
For one, most of the time, people will get to drive their car even with a lien like this against their title. For another, the amount of money they can borrow can be quite large: This is because the value of their car may be quite a lot.
Most loans of this sort are dependent upon the value of the vehicle a person is using to get the loan. In our case, borrowers can get around $2600 or more from borrowing against their car’s title. Additionally, these types of loans generally have a lower interest rate than payday loans: The interest on these loans often runs up to 400% per annum.
What are Payday Loans?
Payday loans are also short-term loans. However, they work differently than car title loans do.
Most borrowers who opt for this type of loan will write a post-dated check to the payday loan company. It is assumed that this loan’s duration will last a very short time, even compared to other types of short-term loans.
Usually, the borrower pays off the loan within about two weeks. It is possible to extend the life of the loan a little bit. However, most of the time, the loan gets paid off within four pay cycles, which usually breaks down to about eight weeks.
What are Some Possible Drawbacks?
It should be noted that this is in contrast to the longer payoff times for the kind of loans that Bay Area Title Loans offers: Loans of this sort can often come with two-year contracts, giving borrowers a longer period of time to pay off their loans. This comes in handy for borrowers who have borrowed a great deal of money against the title of their cars.
That said, borrowers also don’t have to worry about having a poor credit score when going with a payday loan. While the interest rate can be quite high, the access to cash that short-term loans like this give to the borrower can really help.