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Individuals who have less than stellar credit and need money quickly have very few options at their disposal. Two of the most popular loans in these categories are payday loans and car title loans. Below is an in depth guide that explains the differences between the two loans, and lets you know which one may be best in your circumstances.
Payday Loans
Individuals can get a payday loan even if they do not have very good credit. A reputable lender that offers a payday loan Edmonton Alberta is not going to request a credit check. These are quick cash loans that can be in your bank account within 24 to 72 hours, as most are approved instantly.
The most important thing to know about a payday loan is that it must be paid back within a few weeks if you do not want to incur significant interest charges. Since payday loans do not have a credit check, they come with a higher interest rate.
It means that you are looking at a 300% or higher APR on some of these payday loans. Now that may sound scary, but it is not an issue if you are paying back the loan on time. The only instance where the APR can become worrying is if you are taking six or seven months to pay back a single payday loan.
Car Title Loans
The concept of a car title loan is to allow you to obtain money quickly without a credit check, but with a slightly lower interest rate compared to a payday loan. With a car title loan, you are putting up your vehicle as collateral. It means that if you are unable to pay back the loan in the time that is given to you, it is possible your car will be taken by the lender.
There is one factor that plays the most significant role in whether you can get a car title loan, and how much you can borrow. That is your vehicle. If you have a newer car or one that still has a high value, you are more likely to get approved for a few thousand dollars or even more.
While car title loans sound very appealing, they are not necessarily the best way for you to get the quick cash that you need. We are going to dive into the issues with these loans, and why you may want to go with a payday loan for quick cash, below.
Car Title Loans vs. Payday Loans
On the surface, a car title loan may sound more appealing. You can borrow more money, the interest rate is usually lower, and you have a little more time to pay back the loan.
Then why are we recommending that you go with a payday loan when you need cash immediately? Because a payday loan is not asking you to put up anything as collateral. Even if you are unable to pay the loan, you are not going to lose any of your possessions.
A car title loan is very appealing, but it is also extremely risky. Say everything goes perfectly and you pay back the loan on time – it is a good deal. But if there is any issue in your ability to pay back the loan, you could use the vehicle that you spent a lot of money to obtain.
Responsible Borrowing
Regardless of whether you choose a payday loan or a car title loan, it is important to ensure that you are borrowing responsibly. That means you should take a few steps before you enter into any loan agreement.
Firstly, you must ensure that you are thoroughly researching the lenders of these loans. If you are going with a payday loan, ensure that you find a trustworthy lender that offers favorable terms.
Another step you must take is to ensure you have a plan for how you will repay the loan. Do not make the mistake of thinking you can figure out the repayment strategy after you have the loan. Complete a thorough assessment of your finances to determine if you can afford to repay the loan and meet your other obligations in the coming weeks and months.
Ultimately, the choice between a payday loan and car title loan may come down to your preferences. If you are willing to take on the risk of possibly losing your car, then you may consider a car title loan. If you are okay with borrowing a little less money, but want more security from your loan agreement, a payday loan is suitable for your needs.
