Payday Loans or Title Loans: Which Is Right for You?
Are you in a tight financial spot and just cannot seem to pull yourself out? You may have just lost your job, got into a car accident, or have an outstanding ER bill from your child’s broken foot.
We all have things that come up, and sometimes we may not have the money to pay them when they do. This is where a loan comes in handy. There are 2 options that both are type specific and very different for one another, title loans and payday loans.
So, you may be thinking, which one is right for you? Well, there are many differences between the two. First, let’s take a look at some of these differences.
How Do Payday Loans and Title Loans Differ?
Payday loans are typically an amount similar to what you would see in your paycheck. After writing a postdated check, you will receive an amount chosen and approved by the lender determined by what you ask for. You have two weeks to pay back the amount provided, plus interest. If you are unable to do so, added fees and costs will be added to the original loan amount.
Now, title loans are much different. In order to receive a title loan, you must have a car in which you own the title. This loan is typically much larger than a payday loan. This is because the title to your car is used as collateral. If you are unable to repay the loan, however, they will repossess your vehicle.
Each loan is good for different scenarios. Here are some example situations, and which loan would be appropriate for each one:
"I broke a headlight on my car and feel unsafe driving at night."
If you need to get it fixed right away, but I just don’t have the extra cash this week, this is a perfect example of something that can be fixed with a payday loan. It will be a smaller loan that can be paid back with the following paycheck within 1-2 weeks.
"My car payment is due next Friday and I don't think I will have enough money to pay it."
Had to miss a few days of work because you were sick this week? Chances are your sick time is unpaid. This is another example of good use for a payday loan. A payday loan could give quick cash in a small amount that can be paid back with the next check.
”My daughter unexpectedly needed an emergency surgery to have her appendix removed.
This is an example of when a title loan would come in handy. It would provide this person with a larger sum of money that is able to be paid off over a much longer period of time. If you don't have health insurance and the medical bills are piling up, you can always turn to title loans to help you cover this kind of expense.
”I'd like to get an early start on my Christmas shopping, but don’t really have the money yet.”
This would be a scenario that would be appropriate for a payday loan. It will allow quick cash to be paid back in a short period of time so you don't have to choose between doing your Christmas shopping and paying your bills this holiday season.
”My son is currently attending college and got denied financial aid for this semester.”
A lot of people rely on financial aid to help them through college, so it can feel like a huge setback when you've been denied. You may be required to pay up to $5,000 or more to return to school. A title loan would be helpful in this situation. It will provide people in this situation with a larger sum of money quickly to allow their child to go to school and get their education.
Which One Is Right for You?
These are just a few scenarios of which loan to use and when. If you have decided to look into taking out a loan, the next step is a pretty hard one: which loan is right for you? Hopefully, these examples gave you some insight into which one would work best for you and your circumstance, even if they're a little different than the examples above. There's an endless number of unexpected situations we may encounter that a little planning and a title or payday loan could help you overcome.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.