Most people think of a title loan and payday advance as being one of the same. They’re both options if you need fast cash, but they actually function quite differently. Before we conclude which of the two is better, you will need to understand how they work. Payday loans/cash advance and car title loans are alternative forms of credit for people with bad credit. These are people who are unable to get loans from conventional banks because they do not have a credit history. Or they may have defaulted at some time. Maybe you emergency cash to pay for medical bills. Or there’s a utility bill that has come due. These short term options are there for people in the situation of needing cash with a high interest rate.
When it comes to interest rates, car title loans can be slightly cheaper in Texas. The annual percentage rate (APR) for car title loans is 300% while for the payday loans it is about 400%. The basic idea for a payday loan is you are issued with a loan against your next paycheck. Once you get paid the lender will recover theirloan plus interest. The problem is when you default the loan is rolled over,and a penalty is imposed. With time this can accumulate until your loan amount becomes very large. Unlike a car title loan, the note is unsecured,and you do not need to issue any collateral. This results in higher loan interest amounts than in the car title loans. Unsecured loans mean you do not have any title with the lender. In case you default the lender will seek other measures to locate you so that you can repay your loan. This makes payday loans better than car title loans because you do not lose your car title. The advantage of the payday loan/cash advance is that you get your loan immediately. The documentation process is simple and straightforward,and you should have your loan as soon as possible. Most of the payday loans can be accessed online. However, you will need to be aware of frauds.
Texas title loans are going to have a longer payoff period. Here in Texas it can be over a period of months or years. Your pink slip is the collateral for the loan. The underwriting process will begin once you apply online. The lender will appraise the value of the car and give you financing based on this value –usually 25 to 50 percent. Some cities have set amounts that can be issued. Here in Texas, we’ve seen the amounts vary from high to low based on the state you live in. Be sure to check your state and city terms before moving forward with any company. One city in Texas that has set regulations is Austin. You can view their city restrictions on the lending and finance page The loans due to collateral can be higher than payday loans. While these type of auto equity notes have favorable benefits, there are also some drawbacks. Should you default on your loan, the lender will repossess your car. This can be devastating especially if you use your vehicle to meet your everyday needs. Besides this, the finance company may also report your repossession to the local credit bureaus as being late.
From what we have discussed in the article, it is clear that car title loans and payday loans/cash advance are viable choices but come with drawbacks. These finance options are used by people with bad credit. The probability of getting a bank loan if you do not have a credit history or checking account is very low. The process of applying online can be long and difficult. and at the end of the application process you still end up with no loan. Payday and online title loans have a fast and simple application process. Most of the application forms can be accessed online,and you should have the loan amounts in your account within minutes. The drawback is the interest rates charged can be high. These are way above – more than 100% APR – that conventional Texas banks charge. If you are afraid of losing your car, then we would advise to avoid car title loans like the plague. Should you default you lose the pink slip for your vehicle. Payday loans are the best alternative – especially if you do not have title to a vehicle. Make sure you pay the loan on time to avoid penalties.