Which Is Better To Choose: A Payday Loan Or Title Loan?

27 January 2016
 Categories: Finance & Money, Articles


When cash is scarce in your checkbook and bills need to be paid now, where can you go to get money quickly? There are plenty of ways to get cash; however, two of the easiest options are through payday lenders like EZ Check Advance and car title lenders. Payday loans and car title loans offer fast ways to get cash, and almost anyone can qualify for either type. Here are several things to consider as you think about what your best option would be to get the cash you need quickly.

Collateral Differences

One huge difference with payday loans and car title loans involves collateral. When a loan requires collateral, it means you must give the lender something of value in exchange for money. You are not selling the item, though; you are just giving the lender the right to take the item if you fail to repay your loan.

A payday loan does not require any collateral, whereas a title loan does. When you apply for a payday loan, the money will be granted to you without having to put an asset down. In other words, you will not risk anything you own when obtaining a payday loan.

With a car title loan, you will be required to surrender the title to your vehicle if you want to borrow money. If you do not repay the loan when it is due, you will risk losing your vehicle. One good point about car title loans is that the lender will allow you to keep and use your car after taking the loan. When you repay the loan in full, the lender will give you the car title back.

Terms Of Each Type Of Loan

A second difference with car title loans and payday loans is the amount of time you will have to repay the money you borrow. With a car title loan, you will typically have around 30 days to repay the money. This will depend on how much money you borrow, though, and on the terms the lender offers you. Payday loans are typically due within 14 days, but this too may vary from lender to lender.

The other factor to consider is the interest rate you will pay for the loan. For a title loan, you will pay around 300% interest (calculated on an annual basis), while a payday loan may have an interest rate of around 400%. While a payday loan does have a higher interest rate, you may not pay as much in interest in all, because the loan may be for a shorter time and for a smaller amount of money.

Amount You Can Borrow

The third difference you may find with payday loans and car title loans is the amount of money you can borrow. According to the Consumer Financial Protection Bureau (CFPB), payday loan amounts are usually $500 or less. The amount can vary by lender, and it may be based on the amount of money you earn.

When you take a car title loan, the amount you can borrow will depend on the current value of your car. According to Bankrate, car title lenders commonly loan around 26% of a car's value when issuing a car title loan. For example, if your car is worth $1,000, you might be able to borrow $260 on it.

If you would like to learn more about fast cash payday loans, you can contact a lender that offers them today. When you apply, you might be able to receive your loan proceeds within 24 hours or less, and this could be the perfect solution to your problem.