Payday loans - Are they a better deal than title loans?

Consumers who have an occasional need for money can take out a bank or credit union loan, borrow against a credit card, or afford a quick cash loan to meet their needs, but car title loans are increasing in popularity among lenders. There are a number of ways to borrow money if you should find yourself in a tight spot.

There are safe ways to borrow cash and bad ways to borrow cash. The most expensive type of unsecured financing would be a payday loan, but rates of interest can rapidly run into the 300-1000% range for a two week loan. Car title loans are similar to payday loans in cost, but come with additional risk. Clearly the best and least expensive way to borrow cash is to apply for a loan from a bank or credit union. If you are poor or lack sufficient credit, you may be stuck with payday loans or quick cash loans or auto title loans. A credit card loan will work, but such financing carries a higher rate of interest. If you are well off, you can almost certainly borrow from banks or bank card accounts.

Quick cash loans or cash advance loans are unsecured -Payday loans are remarkably expensive; rates for a $15/$100 fee run 391% per year. For a payday loan, the borrower takes out a small loan in the amount of $100-500 and pays a charge that ranges from $15-30 per $100 borrowed. Payday loans are financed with a postdated personal check for the loan amount plus the fee. Quick cash loans are unsecured, which stores say explains the high charges. A cash advance loan is a short-term loan of fourteen days' duration. A payday loan is renewable; it may be renewedfor another fourteen days if the person pays the fee once more.
 

Title loans are risky -An auto title loan functions much like a cash advance, but the cash is secured by the title to the borrower's car. If the money isn't paid back, the lender may take the vehicle and in most states, they may sell it to get their money back. In some states, like Georgia, the title lender may even keep the full amount of the sale, no matter the amount borrowed. Car title financing tends to run a bit longer than cash advance borrowing; thirty days is the most common term.

Given that auto title loans are backed by collateral, one might think that they would be more affordable. The customer not only has to pay steep interest rates, but she is also risking losing their automobile if they don't pay on time, and that happens fairly frequently. Despite the fact that title loans offer less vulnerability to the lender, they often have interest rates that are typically 300-400% a year.

While both vehicle title and cash advance or quick cash loans offer temporary cash to those who must have it at steep rates, title financing come swith extra risk to the customer. It is one thing to borrow money at a steep rate of interest that compares well to borrowing from the mobk, but it is another thing again to risk giving up your personal transportation if you cannot repay. Consumers who are looking at borrowing against their cars should be careful.