Payday loans - Comparisons with auto title loans

Individuals who have a short-term need for funds may take out a bank loan, borrow against a credit card, or afford a payday loan to meet their needs, but auto title loans are growing in popularity among lenders. There are a number of ways to borrow money should you find yourself in a difficult financial spot.

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There are good ways to borrow cash and risky ways to borrow cash. Car title loans are similar to payday loans or cash advance loans in cost, but include additional risk. If you are destitute or have poor credit, you may be stuck with payday loans or vehicle title loans. If you are well off, you can probably borrow from banks or credit card accounts. Of course the ideal and most reasonable way to borrow money is to obtain a loan from a bank. A charge card loan will work, but such a loan comes with a higher rate of interest. The most expensive form of no-collateral lending would be a payday loan, but interest rates can easily run into the three hundred to one thousand percent range for a two week loan.

Payday loans are unsecured - It can be renewed; it may be renewed, or rolled over, for another 14 days if the person pays the charge a second time. Cash advances are paid for with a postdated check for the amount of the loan plus the charge. A payday loan is a short-term advance of two weeks' length. Cash advances are unsecured, which businesses say explains the steep charges. Payday loans are really expensive; interest rates for a $15/$100 fee run nearly four hundred percent per year. For a payday loan, the borrower applies for a small loan in the amount of $100-500 and pays a charge that ranges from fifteen to thirty dollars per $100 borrowed.
 

Car title loans are risky -If the vehicle financingis not paid in full, the lender may take the vehicle and in most states, they may sell it to recoup their money. In some states, like Georgia, the title lender may even keep the entire amount, no matter the amount. Title financing have a tendency to run somewhat longer than cash advances; 30 days is the most common length. Borrowing against your car works much like a cash advance, except the financing is secured by the title to the individual's car.

Despite the fact that auto title lending provides less risk to the business, they often have rates that average 300-400% annually. The customer not only has to cough up high interest rates, but he or she is also risking losing their automobile if they don't pay on time, and that occurs pretty frequently. Given that car title loans are secured, one ought to imagine that they would be cheaper.

While both title lending and cash advance lending offer short-term money to people who need it at costly rates of interest, title lending carries additional risk to the borrower. It is one thing to borrow money at an insane interest rate that contrasts well to borrowing from a loan shark, but it is another thing again to chance losing your vehicle if you fail to pay. Borrowers who are pondering applying for financing against their title should take caution.