People who have an emergency need for liquid funds generally do not have the time to go through the lengthy process needed to obtain a long-term loan from the main bank. Or, they may already have a bad credit rating, which prevents them from being approved. These people may be entitled to receive immediate assistance in the form of payday loans or title loans. Regardless of some overlapping characteristics, these types of loans have clear distinctions and borrowers must know all the details before signing their names on the dotted line.
Here is a fast overview that can help you decide if a payday loan or a title loan is the best for you:
What Are the Title Loans?
The defining feature of a title loan is that it should be backed by some type of guarantee, particularly by the title of a car. The maximum loan amount is generally based on a percentage of the estimated value of the car, but the title loans can be received for amounts as low as $ 100. Just depending on the amount and the correct agreement with the institution granting the loan, the Debt can be settled at once or in many installments over a period of time.
In order to qualify for this type of financial assistance, it is essential to have clear legal ownership of the vehicle, without any prior responsibility for the same auto title. The credit history is fully irrelevant in this case because the transaction is backed by tangible assets. Then, almost all owners of cars, trucks or recreational vehicles can count on this type of loan when the situation requires it.
What Are Payday Loans?
Payday loans do not require any kind of property as collateral, as they are linked to the regular income of the borrower and are reimbursed as soon as the next paycheck arrives. This method of financing is generally used to overcome a temporary cash shortage and make ends meet until you get your next paycheck. Payday loans can be issued very rapidly, despite credit rating or existing obligations, so they are popular with people who might not otherwise be able to get long-term credit or who are not willing to wait for the process of a bank loan is completed.
What Type of Loan Is Better?
Each type of loan has its own advantages and disadvantages. Regardless of their considerable similarities, title loans and payday loans are intended for various situations and lenders must know the exact conditions to properly estimate which one they really require. It would be a fault to compare these two types of loan and ignore the small but relevant differences that could have grave consequences when the loan expires.
Payday loans are generally a better option when you immediately need to spend some cash, there are still a few days left until your next paycheck and you are willing to pay the full loan with your next paycheck. But if the required amount is greater than your weekly income or you cannot sensibly pay what you owe with your next paycheck, title loans become the smartest option. Individual circumstances can vary and the final decision just depends on a number of factors, such as people who do not own a vehicle obviously would not qualify for a title loan.