A payday loan is not an entirely new term to someone not belonging to the class of the elites. Doing away without needing financial assistance apart from your monthly check is almost impossible with this present tough economy.
A payday loan is that cash advance offered to a consumer in exchange for a future paycheck. The payday loan is intended to save consumers from financial mess which can dent their reputation.
However, the interest rate on a payday loan is usually more than double the amount borrowed, that is, over 100% interest rate.
How Payday Loan Works
Imagine you are financially unbalanced, maybe short on cash due to unforeseen circumstances and waiting till the end of the month when your salary will be paid can be disastrous, you approach the payday loan lender, and you request for a payday loan. You will be required to write a post-dated check for the amount you apply to borrow which is usually between $50 – $1000, and also you will need to include the charges by the lender on the amount you qualify for, and you are willing to borrow. When your payday eventually comes, the lender will cash the check.
How Car Title Loan Works
With a car title loan, in the instance where you have a car, you can apply for a car title loan. This implies that the lender assumes the ownership of your vehicle within the stipulated date you are required to make a loan repayment. Failure to honor the terms of your contract means you risk losing your car to the lender. Some of the documents to tender as a consumer include your details, a utility bill, proof of ownership and the property with which you want to pledge the title. In a car title loan, you go with the car you have outright ownership on. That means you must have paid completely for the car before you can use it as a car title loan.
Similarities between Payday Loan and Car Title Loan
- Both are short-term loans, within 30 days
- Both do not consider your credit history
- Both are easily accessible and have a fast processing time
- Both involve the use of collateral, future paycheck in payday loan and property ownership in title loan
Differences between a Payday Loan and Car Title Loan
- Payday loan involves a relatively smaller amount ($50 – $1000) while a title loan is sometimes above $5000
- Payday loan has a higher interest rate compared to a title loan
- A payday loan is mostly accessed offline while a title loan is now online with various lenders.
Which is the better option?
Choosing the better option between the two is hard. Each comes with its peculiar risk, but as a loan consumer, you must carefully weigh both options and decide for yourself which perfectly suit your present need as a borrower.
To access a car title loan, you can go online to do some research about trustworthy and reliable online lenders.