Two popular ways to get cash quickly are title loans which are based on the value of your car, or online payday loans which are based on your next paycheck. Both options have their pros and cons making the choice somewhat difficult. For this reason, we have set out facts about both loan types so that you can make an informed choice which is better: payday loans online or is it a title loan?
Taking a short-term loan is a serious matter as it will need to be repaid on time, especially payday loans online. Remember that the annual interest rate refers to the annual interest rate and measures how much interest you will pay for the loan during the year. Some lenders and types of loans have a higher annual interest rate such as payday loans online than others. Having covered the basics, let’s look at the differences between these types of loans, and perhaps you will settle for payday loans online.
What are Title Loans?
A title legal loan is a short-term loan secured by your car. If you are unable to repay the loan, your car will be returned to the property and sold to the lender to get money back. To get money on a title loan, unlike payday loans online, the lender will estimate the value of your vehicle. Then you will be offered a loan in the amount of 25% to 50% of the cost. In some states, the balance of these loans can reach $ 50,000 depending on the amount at which the car is valued. However, this cannot be said about short-term payday loans online.
The term of a typical title loan is 30 days, unlike payday loans online. This means that you have 30 days to pay off the loan after signing the contract. The average interest rate on a title loan is between 8% and 25% per month which corresponds to a standard title loan with an annual interest rate above 300%.
While a title loan may seem like a good solution for getting money when you need it, there is a danger if you don’t pay back the money on time. In most cases, non-payment of the loan means that your car will be returned to the lender who will then sell it to get their money back. Before taking out a title loan, carefully consider whether you can repay the debt to the lender. If you cannot do this, you may be left without a car. Therefore, you need to think about how it will affect your life. In this case, it is better to choose payday loans online without the risk of losing property.
If you decide to apply for a title loan, be careful who you go to. Most of them are located in shady areas where a lot of unreliable business transactions take place. If you choose not to obtain an online property loan, then you will need to appear in person to get your vehicle appraised. If you use one of the highly-recommended lenders, then everything will be done online similar to payday loans.
What are Payday Loans?
A payday loan refers to a short-term loan that borrowers take to pay for what they need before the next paycheck. The money is expected to be refunded on the next payday by means of a date check. Payday loans online include a financing fee calculated as an annual interest rate. The annual interest rate on top of payday loans can be very high, on average almost 400% although it could be higher. If you do not return the money by the agreed date, then an additional fee will be charged.
The typical term for payday loans online is two weeks but maybe longer as well. If you are late paying payday loans online, you don’t need to worry about your vehicle being returned to possession. But you do need to worry about taking another finance fee and late fees. It might not sound like a big deal but the fees add up.
Payback periods of online payday loans are quite short compared to a title loan. You only have two weeks on average to get your money back. If you are late in receiving your payment or your paycheck is not what you expected, your check issued to the lender may not be validated by your bank. This is resulting in additional costs for your payday loan online.
Due to the lack of collateral, you can expect aggressive late payment methods and attempts by creditors to repay the debt. The lender may constantly call you, send scary letters, and threaten you with legal action. They may even send debt collectors or bailiffs to you if debt spirals.
Which is Better to Choose: Title Loan or Payday Loan Online?
Loans against title collateral and payday loans should be approached with caution. Their structure can further exacerbate dangerous monetary situations. The lenders of these loans usually do not care about the interests of the debtor. They just want their money back. If you don’t follow through on your promise to pay them, you could be in trouble.
On the one hand, payday loans carry less risk of personal property loss. But they have extremely high-interest rates compared to title loans. On the other hand, title loans allow you to take out larger loans and have a longer payback period without prepayment penalties which gives you more time to collect cash.
Financial experts can recommend other ways to get the money you need that are less dangerous for you and your family. Common methods include selling things you no longer need, asking for an advance on your next paycheck, or using a credit card if possible. Credit cards may sound daunting since their interest rate is less high when compared to title loans or online payday loans. You only pay a small fraction of the commission. Moreover, if you pay within 30 days, then no interest will be charged.
Using a loan also helps to raise your credit score helping you become more financially secure in the future. If the only option you have is getting a paycheck or a title loan, be sure to do your own research. Find a reputable lender online that does not charge excessive fees and complies with the law. The last thing you want is to have more debt.
