Title Loans Vs. Payday Loans: What Are The Differences?
When faced with a financial emergency, you can turn to emergency cash loans to borrow money quickly to pay for your urgent expenses. Two such emergency cash loans compared to borrowers in Utah are title loans and payday loans. While both allow you to borrow cash in less than a business day through a similar process, some of the other details are vastly different.
This guide from Idaho Title Loans, Inc. compares title and payday loans and their differences. Use the information below to determine which emergency cash loan better fits your financial situation.
Title Loans Vs Payday Loans: Explaining These Emergency Cash Loans
Title loans vs payday loans can be hard to understand without knowing what each loan is. There are specifics to consider when you compare title and payday loans that are essential to understanding which loan can better help you with your financial emergency.
The following are the definitions for title loans and payday loans:
1. Title Loans
Title loans are a type of secured short-term fast loan that requires the potential borrower to provide their property as collateral to secure the lender’s assets. In this case, a lien-free car title proves the borrower's complete ownership of the car. You must have fully paid off your vehicle before you can use it for a car title loan.
To qualify for a title loan, you’ll need to be of legal age, provide your car for inspection (its price and state will determine the maximum loan amount you qualify for), and – most importantly – the car’s lien-free title in your name. If the title has any outstanding liens placed against it or it's not in the borrower’s name, it cannot act as collateral.
Idaho Title Loans, Inc. will accommodate any credit type (good, bad, or nonexistent) and income situations, as long as the items you provide manage to prove your eligibility.
2. Payday Loans
Payday loans are a type of unsecured short-term fast loans. Unlike title loans, you won’t need to provide any collateral to qualify. You will, however, need to provide proof of income (to show your ability to repay the loan down the line) and a blank check from an active checking account in your name, along with the identifying document proving your legal age.
These loans are otherwise known as payday advances. They allow you to borrow from a future paycheck to handle urgent costs. Repayment of payday loans happens with your next paycheck. As with title loans, all credit types are welcome, and your income situation will be accommodated accordingly.
Payday Loan Versus Title Loan: 4 Ways They Are Different
Now that you understand the definitions of title loans and payday loans, it’s time to explore the specific loan terms and how they differ. Both loan types are pretty accessible, available to people with bad or nonexistent credit, and require only a handful of items to qualify for. However, there are differences that distinguish which is most helpful in certain financial situations.
The following are the differences between a payday loan versus title loan:
1. The Maximum Cash Amount
The first thing that will stand out when considering title loans vs payday loans is the maximum loan amount you can borrow. As a secured type of loan, a title loan can provide a much larger sum than a payday loan. You can borrow up to $15,000 with a title loan, whereas you can only borrow up to $500 with payday loans.
This is one of the benefits of title loans over payday loans. If you have large expenses, a title loan may be better to help you afford it. However, payday loans may be better for those with smaller costs.
It’s important to remember that these are maximum loan amounts; not everyone will qualify for $15,000 and $500. Your title loan amount depends on your car’s value, whereas your payday loan amount depends on your income level.
2. Requirements
Both emergency cash loans have different required items for approval. Both require borrowers to have their driver’s license or a state-issued photo ID to verify their identity and age.
However, that’s where the similarities end in their requirements. Title loans require borrowers to have a lien-free car title in their name and the vehicle attached to the title for a quick inspection. Payday loans require the borrowers’ most recent pay stub to verify their income and a blank check from an active checking account in their name.
3. Repayment Period
These emergency cash loans have vastly different repayment periods, which makes sense because your loan amounts are so different. For payday loans, repayment is much more simple. Borrowers repay their payday loans using their next paycheck.
Title loans have a more flexible repayment period, as title loans are paid over several installments over a set period (this is determined on a case-by-case basis, so check in with your agreement).
4. Long-Term Impact Of Interest
When considering title loans vs payday loans, repayment and interest rates are essential to consider. Interest rate is the percentage of the principal the borrowers must pay on top. The longer it takes to repay a loan, the more interest you will pay.
Payday loan borrowers have less to worry about with interest. Since they repay their loan with their next paycheck, there is less opportunity for the loan to accrue interest. That is not the case with title loans since they are paid over a couple of weeks or months. The longer it takes to repay your vehicle title loan, the more it will cost due to interest.
For that reason, title loans can have a more significant long-term impact than payday loans. When borrowing a title loan, you should consider the long-term financial impact caused by repayment and interest rates that do not apply to payday loans.
How To Choose Title Loans Vs Payday Loans?
With all of the details and differences between these loans in your mind, only one question remains: title loans vs payday loans, which should I choose? The first thing you should consider is if you can get approved for each loan. Do you have a lien-free car title? Do you have a job or freelance gig where you make income? Do you have a checking account?
Once you determine which you can get approved for, you should think about the payday loan and title loan advantages. Each caters to a certain type of borrower. Those looking to pay smaller, short-term expenses are better off with a payday loan. For example, payday loans can help better when needing just a couple hundred dollars to pay rent if you missed time from work this month.
However, expensive financial emergencies may necessitate a title loan. For example, you may have auto repairs that exceed $500 that you will only be able to afford with auto title loans. The final thing you should consider regarding payday loans versus title loans: are the long-term impacts mentioned above worth it for this expense? If the answer is yes, then you can proceed with the approval process.
The Approval Process For Title Loans And Payday Loans
The approval process between title loans and payday loans is similar. With the exception of the vehicle inspection for title loans, you will have to complete the same steps for both emergency cash loans. At Idaho Title Loans, Inc., we simplify the process to allow borrowers to get approved the same day they apply, making it easier to receive funds to pay for your financial emergency quickly.
The following are the steps involved in the approval process for our loans:
- You can begin by submitting your information online through our contact form. Some of what we will ask for includes your name, email address, phone number, and zip code. If you apply for a title loan, you must include the year, make, and model of your vehicle.
- A loan representative at a nearby Utah store location will receive and review your information. They will then give you a call to verify the information you provided, answer any questions you have, and explain the rest of the process.
- Collect all of the required items for your quick cash loan and head to the nearest Idaho store location. Once there, a loan rep will verify your requirements to determine if you can get approved. If you’re looking for a title loan, they will also inspect your vehicle to determine its value.
- If you’re approved, you will sign some paperwork to complete the process. We will then send the money you’re approved for to your bank account via direct deposit. You will receive your emergency cash the same day or the next business day.
Apply For Title Loans Or Payday Loans Today – Borrow Same-Day Emergency Cash!
When you compare title and payday loans, you must consider the requirements, loan amounts, repayment process, and other details. Now that you understand payday loan and title loan advantages, you can make an informed choice as to which is better for your financial situation. Whether you choose title loans or payday loans, we have a simple approval process that can help you borrow money quickly.
Start the process of getting title loans or payday loans today by filling out our online inquiry form on our website. A loan representative will call you soon to discuss the process, requirements, and everything you need to know about getting one of these loans.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.