What are the Differences Between Payday Loans and Car Title Loans?
If you are like me, you have never heard of car title loans but have had some experience with payday loans. Most of us have had a time when we were running short on cash and payday was almost a week away. You see advertisements for payday advance loans, apply for the loan, and walk out the door with enough money to last until payday.
Are Payday Loans or Car Title Loans a Good Idea?
There are many alternative ways to get help with your bills that do not have the high interest rates that both of these loans have. In addition, payday loans and title loans are considered predatory lenders, meaning they make money off other people’s misfortune.
Alternatives to Payday loans and Car Title Loans
There are many other ways to get the money that don’t involve high interest rates or that have to be paid back as quickly as these loans have to be.
One way you can do this is by borrowing money from friends or family members. Usually, friends and family will not charge you interest or expect you to pay it back within a week or so. So instead, take a cash advance from a credit card if you have one. This way, you will incur interest but at a much lower rate than you would with payday or car title loans.
All About Payday Loans
What are Payday Loans?
Payday loans are short-term loans. When you get a payday loan, you give them your banking information or a check to pay them back. These loans usually are only for a couple of weeks. When you pay them back, you have to pay the loan plus interest. That reason alone is why so many people try to avoid them unless they really need them.
What are Payday Loans Interest Rates?
A payday loan’s interest rate is 391%. Keep in mind that it only applies if you pay it back on time. If you do not pay it back in two weeks, it rolls over which means added charges and finance fees.
How Do I Get A Payday Loan?
You can apply for a payday loan either online or in one of their offices. You will need proof of steady employment, a checking account, and personal identification to qualify for the loan. No credit check is required, and you do not have to provide information about your other expenses. The entire process takes just a few hours.
How Much Money Can I Get With A Payday Loan?
The amount of the loan you can get varies from state to state. It can be anywhere between $100 to $1,000 depending on the state’s legal limits.
All About Car Title Loans
What are Car Title Loans?
Car title loans are loans in exchange for your title. For example, you give a company the title for your car, providing you with cash in exchange. Your car title is held for collateral. If you do not repay the money, then they take your vehicle.
What is Car Title Loan Interest Rates?
Car title loan interest rates are just over payday loan rates at 400%. Car title loans are typically for 30 days, unlike the two weeks for payday loans. If you can only make a partial payment on your car title loan, they accept your payment and then roll it over, adding more interest and charges to your loan.
How Do I Get A Car Title Loan?
While you may apply for car title loans online, you will have to go into their office to inspect the car and determine the value. To qualify, you have to own your vehicle outright, and the vehicle must be paid off. If there is a lien on it, you will not be able to take out the loan. Like payday loans, car title loans do not run credit checks or ask about other expenses.
How Much Money Can I Get With A Car Title Loan?
Car title loans are typically 25 percent to 50 percent of the value of your car. Similar to payday loans, car title loans amount may be determined by the state and the business’s limits. In some states where it is illegal to get a car title loan, you can get an installment loan which is just another name for a car title loan.
Conclusion
If you choose one of the above-listed options, do so knowing the benefits and the risks. Both of these options can help you out when you need it. Just do not overuse it and end up in a vicious cycle. Overuse of these two loan types can cause your finances to get out of control where your debt outweighs the amount of money you have coming in and lead you to file for bankruptcy.
People need money for different reasons and these types of loans can prove to be very helpful and beneficial when used responsibly. If you find yourself needing these types of loans, be sure you have a full understanding of the loan terms and always read the fine print.