Title Loans Vs. Payday Loans: Which One Should I Borrow?Fast Action Finance
Financial strain is the main reason most people go looking for ways to get money. Loans are one of the popular solutions that most people opt for. Traditional loans, unfortunately, do not always work. This is mainly because thereâ€™s a lengthy approval process that often lasts for weeks. Moreover, qualifying for one is not always guaranteed. As a result, people are forced to look elsewhere, especially if they are in need of fast cash. In such cases, there are mainly two options left; car title loans and payday loans.
At this point, the question of which to opt for is eminent. Should I choose a payday loan or a title loan? Which one has more benefits or risks? Both of these loans are in constant competition. And whether you choose the title loan or the payday loan, the final choice is yours to make. Nevertheless, itâ€™s good to stay informed on what both loans have to offer. Hereâ€™s an exploratory look at the similarities and differences of both loans and the implications they have.
Both loans are quick loans whose qualification criteria are almost similar. Like any other loan, both of these require proof of identity, address and income that will enable you to repay the loan in full. A car title loan requires ownership of a car as collateral for the loan. The borrower will be required to hand in a spare set of keys and the car title. Any additional eligibility requirements of the payday loans vary from lender to lender. They, however donâ€™t require collateral.
Amount of loan issued
While the amount of title loan one can borrow mainly depends on the value of the car, the level of oneâ€™s income plays a vital role in determining the amount of payday loan issued. The principal amounts are also highly dependent on the above factors with that of a payday loan also determined by the amount of money owed.
While both of these loans are short term loans, the length of the repayment period will vary. Usually, payday loans are repaid in a month or two at most. On the other hand, the repayment period for car title loans is 3-6 months. Occasionally, car title lenders offer the option to extend the repayment period.
Financial implications for borrowers
Like any other loan, there are no penalties imposed for timely payments. The opposite is however true is, payments are made late. Being short-term loans, the penalties are often high. However, payday loans often impose higher penalties.
The interest rates charged on these loans are generally higher than traditional loans obtained from banks. Title loans often charge lower interest rates while those charged by payday loans can be as high as 20%, which is not APR. This makes them very expensive considering the loan is repaid in not more than two months.
This is one of the major bonuses of both payday loans and title loans. For one, most lenders do not check your credit score before lending money. This generally speeds up the approval process. In addition, they do not use credit reporting agencies. However, lenders may decide to report the loan to credit bureaus occasionally in cases of late payment. As long as one can pay back in a timely manner, one shouldnâ€™t have to worry about how this will affect their credit score.
Why title loans come out on top
While both loans are similar in a lot of ways, there are definitely some differences that draw a line between the two. Looking at payday and title loans from all of the above angles, itâ€™s easy to see why title loans win the battle. While the payday charge higher interest rates have a short repayment period and high penalty charges, title loans have much more to offer.
The quick processing procedure combined with low interest rates, longer repayment period with room for extension, low penalty charges and potential for borrowing more money are what make them the best choice. Offering what payday loans have failed to offer over the years is what makes title loans a desirable option for any borrower.
You need money and you need it fast. But even then, you need to choose the option that works best for you. That would be the type of loan that will give you enough time to repay it, one that has low interest rate, and as much money as you need. Having limitations is not a problem as long as it works for you. Frankly, a title loan would work better than a payday loan. It fits the profile after all.
If youâ€™re in need of title loans in Mississauga, consider giving us a call. We not only offer title loans, we will also answer all your questions that you may have. Our top priority is ensuring that you meet your financial needs and our title loans will enable you to do so.