Car Title Loans Vs. Payday Loans
Updated: Dec 2, 2018
When money is in need and you don’t have a rich uncle, you need to borrow it. In Canada, you have number of options, the common ones are pay-day loans and car title loans. Both work fast and you can get the money on the same day, usually in the matter of minutes or hours. But let’s compare the two to see which one makes the wisest choice out of these 2 options;
Both these loans are quite straightforward and their requirements are easy to understand. With payday loans you need to have a steady job and stable income on regular basis, your credit background will also be checked. With auto title loans none of these matters, the only thing you need to be eligible for the loan is to own a car. This means that there will be no credit checks, nobody will want to see proof of employment or how much money you make since Car Title Loan is based on the Equity of your car.
Car loans are perfect for those who are in between jobs, self-employed or have made some bad financial decisions in the past and have bad credit. They are fast and require a minimal amount of paperwork to get approved.
Considering that you need money ASAP, it’s important that the loan is easy to apply for and your application is processed quickly. Both types of loans work fast, you can even apply online. A pay-day loan would require a larger amount of paperwork and more personal information need to be shared. Applying for a car title loan there are no upfront fees, however, some payday lenders 3-6 months employment history and 90 days bank statement.
It takes only a short time for the lender to decide whether or not they should give you the loan. With both these loans, your application is normally approved or declined within an hour and you get the money on the same day.
In case of payday loans, the amount you can borrow depends on your income, credit score and other factors. You need to pay the entire amount back on your next payday or just the interest and roll over to your next payday. Loans for car title are given based on the value of the car, which usually means you can get a larger amount than with a payday loan. Another huge advantage is that car title loan companies have set longer payback terms, you don’t have to pay it all back from your next paycheck. This keeps your monthly payments low and you have better control over your finances.
Cost of Loan
All loans have interest rates and some have fees. Interest rate is a risk factor the lender takes. Since there is no collateral on payday loans, the fees and interests are quite high, especially if for some reason you can’t pay the loan back on the agreed date. Car title loans have lower interest rates and they are more flexible, monthly payment are affordable and your loan balance is reduced with each payment made.
When you need
money and have to turn to loans to get it, both payday loans and car title loans can help you out. With a smaller amount, regular income, and a good credit score you might want to apply for a payday loan, however, car title loan looks to be a better option thanks to lower interest rates, longer payback terms, flexibility and simple application process. Paying back this loan will not have a huge impact on your budget but the loan itself can help you out in a tough situation.
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