There might come a time when you need quick cash. Maybe you've thought about applying for a loan. But you don't have the time to deal with a lengthy application or approval process. You need the money immediately to tide you over to your next paycheck or to handle a sudden emergency.
The good news? There are fast money possibilities for such circumstances. Two such options are title loans and payday loans. Both are similar in that they offer fast application and approval. But they're also different regarding loan application requirements and available amounts.
What Are Title Loans?
Title loans are short-term secured loans. This means the borrowed money is backed by collateral - in this case, a vehicle. Cars, motorcycles, boats, and recreational vehicles are all examples of collateral used to secure a title loan.
When you apply for a title loan, the lender appraises the vehicle's value and your ability to repay. Then you're offered financing for 25-50% of the vehicle's value. If you accept the conditions, the lender holds the vehicle's title until you've repaid the entire loan in 15-30 days. Even though the lender has the title, you still have access to the vehicle during that time.
To qualify for a title loan, you must provide a clear title of ownership, proof of insurance, and a photo ID. Your lender might also want a set of keys, though not all states allow this. Another requirement might include a GPS tracking device or a roadside service plan.
Pros of Title Loans
These loans are secured, so the title lender likely won't run a credit check on you. That means you can qualify, even with bad credit. Because the vehicle's value determines the loan amount, the loan amount can vary significantly.
Cons of Title Loans
Title loans are short-term, meaning you must repay them in 30 days, though some states allow rollovers. You also need equity in your vehicle to qualify for a title loan.
Equity is essentially how much of the vehicle you own, and you find out how much equity you have by subtracting the payments you own from the value of your vehicle. So if you just purchased the vehicle using a loan, you probably don't have much equity - meaning you might not qualify for a title loan.
Interest rates can also be high with this financing type. Typical annual percentage rates (APRs), which include interest rates and fees, can reach 300%.
But the major disadvantage of a title loan is that the lender can repossess your vehicle if you fail to pay it back. This could leave you without transportation.
Title Loan Use Cases
Thanks to the quick approval process, title loans can be ideal for sudden emergencies. For example, a title loan could be a good option if you have sudden plumbing repairs or need to pay off medical expenses.
But if you don't want to put your vehicle at risk or deal with high interest rates, look for another option.
What Are Payday Loans?
Payday loans are short-term, unsecured loans. They don't require collateral. They're called "payday" loans because you repay them when you receive your following paycheck.
These loans provide smaller amounts than title loans, generally less than $500.
When you apply for a payday loan, the lender needs authorization to access your checking account. This requires a post-dated check with the loan total and any finance charges. The loan term is generally 30 days, though some states allow rollovers or renewals.
To qualify for a payday loan, you must be at least 18. You also need an active checking account, proof of income, and a state ID.
Pros of Payday Loans
The main benefit of a payday loan is that it's quick. You can often apply and receive funding within a few hours. These loans are generally not reported to the three credit reporting companies, meaning a payday loan usually won't impact your credit score.
Cons of Payday Loans
Payday loans are small, so they can be less than ideal for paying off larger expenses. Additionally, if you fail to pay off the entire loan when it's due, you could face extra charges or large penalty fees. This could put you into an ongoing debt cycle. Payday loans also carry high interest rates: you could face an APR of 400%. Interest rates, charges, and fees vary by state.
Speaking of which, payday loans aren't available - or even legal - in every state. You can't get a payday loan in:
- Arizona
- Arkansas
- Connecticut
- District of Columbia
- Georgia
- New Jersey
- New Mexico
- New York
- North Carolina
- Pennsylvania
- South Dakota
- Vermont
- West Virginia
Keep in mind that payday loan laws change regularly. Before considering this option, be sure such loans are legal in your state.
Payday Loan Use Cases
Payday loans could be helpful if you need help with an extra bill or two before your next payday. You should also ensure you can repay your loan by the next paycheck to avoid extra charges. Another reason to consider a payday loan is if you have bad credit and might not qualify for a traditional loan. In most cases, a payday lender doesn't need a credit check.
The Best Option for Fast Money
The decision about a payday loan vs. a title loan depends on your financial situation and the loan's purpose. Once you figure this out, be sure you have the means and ability to repay the loan. Also, understand any consequences for missed payments or even defaulting on the loan.
Payday and title loans are one option for quick cash. Another fast-money option is Jora Credit. Jora Credit offers personal installment loans of up to $4,000, with no required credit check. Depending on what time you apply, you could receive funding within the same day.
For more information or to apply, visit Jora Credit today.