Times are tough these days, and those of us who do not have the best credit scores are significantly limited in the ways we can borrow money, including to purchase or lease a new vehicle.
While someone with a high credit score can get a bank loan or a credit card with a 0% APR introductory offer, that is not possible for people with low scores, who often rely on payday loans and car title loans.
Here is how to compare the advantages and disadvantages of these two popular no credit check borrowing tools.
The concept of a payday loan is very simple.
You are borrowing anywhere from $300 to $1000, and you are going to pay the money back when your next paycheck comes through.
It is a very short term loan you should not be keeping for more than a few weeks.
Whether you look at online payday advance loans at personalmoneynetwork.com or another payday loan site, you will find the application process is very easy.
The advantage of online payday loans for bad credit is that only a limited amount of personal information is required and you are good to go.
At most, you are asked about your bank account details.
That is necessary as the lenders wants to know if you get direct deposits, as it implies you have a job.
When you are approved for the sum, you are sent an offer that provides details about the interest rate and payback schedule.
Car Title Loans
A car title loan is an option for those who have a vehicle with a reasonable value.
If you have an old or damaged car or truck that you would struggle to sell for $1000, it is not enough value to get a car title loan.
But if you have a late model vehicle, or an older car that is a valuable classic model, you are eligible for such a loan. It is a collateral loan, since you are putting up the title of your car in exchange for the money you are getting.
And you do not have to give up your vehicle for the interim.
You keep your car, and as long as you make all the relevant payments on time, it stays in your possession. You are putting up only the title up as a safety net for the lender.
It is only if you miss several payments that the loan company takes possession of your car – something that can also occur if you miss payments to the bank or vehicle finance company.
Payday Loan Advantages
One of the key advantages of a payday loan is you do not have to put up anything as collateral. You are only taking out money briefly with a higher interest rate.
Since you are meant to pay back the loan within weeks, the interest does not amount to much money.
You also are able to get a payday loan processed very quickly. If you provide your bank details and you are approved, you could get the money in your account within one or two business days.
It is the quickest way to get the cash you need, without giving up anything.
Lenders are also flexible about repayments, should you have any issues with the agreed schedule.
Unlike with your original purchase or lease, you won’t be reported to a debt collections agency if you are late on a couple of payments. Yes, you have to pay more interest, but you will still be in good standing with the lender.
Another advantage is how you can borrow more money in the future, if you make the existing payments on time.
Title Loan Advantages
The key advantage with a car title loan is the lower interest rate compared to payday loans. If you want to take out a loan for a few months, a car title loan is a better option.
If you are looking for a short term loan, a payday loans is a better option. The higher interest rate is not much of a factor when you are paying back the loan within weeks, not months. And you are not giving up anything as collateral, either.
Car title loans are not an option for those who do not own or lease a vehicle. Then you are not eligible for this loan, which means a payday loan is your only and best option.
Know Your Rights
Regardless of the loan you pick, it is imperative you borrow safely.
Ensure you have done the proper checks on the company that is providing you with the loan. Read through the terms of the loan so you are fully aware of what you are signing.
Only then should you borrow the money, as you would be doing so with both eyes open.
Know your rights under the federal Fair Credit Reporting Act, including what information about you can be shared.
Also, you are entitled to see your credit history. How to get a FREE credit report.
What do you think? We value your comments and love hearing from you.