When you need some money to pay an unexpected expense and have nowhere to turn, there is a solution. You can apply for a car title loan or a payday loan. These are both excellent options, and while they are similar in some ways, they are also different in others. Here are three of the top differences to know about if you are thinking about using a car title loan or payday loan to get cash now.
The most obvious and significant difference between a title loan and a payday loan is the collateral requirement. When you get a payday loan, you do not have to provide collateral. The lender issues you a loan based on your incoming earnings from your employment. You submit pay stubs to prove you have a job with income, and the lender gives you a loan based on that factor alone.
You cannot get a title loan without collateral, and the collateral you need is a vehicle title. You must own a car and have the title in your possession. You cannot qualify without the title, as you must surrender it to the lender in exchange for a loan.
Amount of the Loan
The second difference is the amount of the proceeds from each loan type. A payday loan generally offers a lower amount of cash upfront compared to a title loan. However, some factors affect the amount you can get from either type. For a payday loan, you might only be able to borrow a certain percentage of your normal weekly earnings. For example, if you earn $500 a week, the lender might only offer to give you $250.
With a car title loan, the lender bases the loan amount on the value of the car. If your vehicle is worth $1,000, the lender might offer $300 or $400. If your car is worth $5,000, you might be able to get $3,000 for it.
The Time It Is Due
The time in which the loan is due might also differ between a payday loan and a car title loan. Payday loans typically have shorter due dates, such as two weeks. A car title loan might give you more time than this to repay it.
As you can see, title loans and payday loans are different in some ways, yet both offer financial relief when you need it most. Talk to a lender to find out which option is right for your situation.
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