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How Is an Auto Title Loan Different from a Payday Loan?

How Is an Auto Title Loan Different from a Payday Loan?

By 9  am on

Sometimes people need quick cash for unexpected emergencies. Payday loans and title loans are both used fairly commonly. Multiple states have recently placed restrictions on payday loans, which has caused more Americans to turn to title loans. Here’s what you need to know about the differences between title loans and payday loans, brought to you by the professionals at Payless Car Title Loan, a top provider of auto title loans San Diego car owners can turn to when they need an affordable way to get quick cash.

What Is a Payday Loan?

A payday loan is a small loan taken out for the short term. To pay back this type of loan, you usually give the loan company a check post-dated after your next payday. Payday lenders usually expect these loans to be paid back in 7 to 14 days. By the end of the stipulated period, you must pay back the loan as well as financing fees. If you cannot pay the loan back within the specified period, you can have it rolled over. However, rolling these loans over raises the rates. To roll over the loan, you must write a new postdated check.

What Are the Requirements for a Payday Loan?

A payday loan requires proof of income, an ID, and a bank account. Payday loans are accepted in 45 states, most of which restrict these loans to $500. The annual percentage rate is more than 400 percent, and the fees are $10 to $30 for every $100 borrowed. Using a payday loan or missing a payment won’t impact your credit score because these instances aren’t reported to credit bureaus. If you default on the loan, your loan could go to debt collectors or you could be sued. In either case, your credit report will be affected.

What Is a Title Loan?

A title loan is a small loan you take out using your vehicle’s title as collateral. The average borrower will spend a total of $1,200 for a $1,000 loan. The lender can put a GPS tracker in your vehicle to make it easier to repossess if you default on the loan. As with payday loans, these loans come with high interest rates. If you cannot make a payment, the lender will usually roll it over for additional fees.

What Are the Requirements for a Title Loan?

A title loan requires proof of insurance, an ID, and a car title. The amount of the loan will depend on how much your car is worth. A title loan typically equals 25 to 50 percent of the vehicle’s value. These loans are only permitted in 17 states, but some other states allow them with certain restrictions. The average fee for a title loan is 25 percent of the amount that was borrowed. Missing a payment or taking out a title loan won’t affect your credit score because these events aren’t reported to the credit bureaus. However, if you default on the loan, the lender can repossess your vehicle, which will show up on your credit report.

When they’re looking for alternatives to payday loans and companies such as LoanMax, San Diego car owners can turn to the trustworthy team at Payless Car Title Loan. If you need quick cash and you own a car, we can help. Give one of our friendly team members a call today at 619-600-0061.

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