Car Title Loan or Payday Loan
Many of us have seen the ads on television promoting loans for people with bad credit or no credit as no problem. We have also seen the neon signs in cash advance stores advertising title loans and payday loans. As we are bombarded daily with these various types of loans, it is easy to get confused. For anyone contemplating this type loan it is important to understand the differences in these loans before you make any decisions.
A car title loan is very much like it sounds. In order to receive the loan you sign over the title to your paid for car as collateral. These loans are typically for a longer period — 30 days; although they still have the high interest of similar short- term loans (source). There can also be fees for roadside assistance and processing added on to the amount of your loan. The result of defaulting on your loan is often repossession of your vehicle. People who do not have as steady an income as required for payday loans often take out these loans as a last resort.
Payday Loans are similar to title loans in that there is often to credit check required to receive the loan; however there are significant differences. For one, payday loans are usually for smaller amounts. Some states have regulated caps on the amount around $600. Also, payday loans have a much shorter cycle — two weeks or until the next payday. Most lenders require a paycheck stub or proof of income before you can receive the loan.
Regardless of what type of loan you take out, it is important to read and understand everything before you sign the paperwork. Both of these loans are viable options for people who find themselves in tough financial situations, just make sure you understand and are able to take on the obligations you are signing yourself up for.