Car Title Loans or Pay Day Loans - Which is the Better Option?

Car title loans are not quite as well known as pay day loans, however, for consumers considering one or the other it is important to know which is the better option. First and foremost it is important to know what a car title loan is and what a payday loan is.

Car title loans are personal loans made against the value of your vehicle. It requires you to own a vehicle that is free from any liens (meaning there are no existing loans using the car as collateral). Some car title loan companies offer loans against trucks, motorcycles, mobile homes and trailers.

A payday loan is a personal loan made against your future earnings. The amount of a loan you can receive depends almost entirely on your paychecks. Though possible, it is difficult for self-employed people to be approved for payday loans.

When comparing payday loans and car title loans it is important to consider a few different factors. Typically you will find better interest rates on car title loans than on payday loans. Whereas a car title loan is guaranteed by collateral (your car), payday loans are not guaranteed since your employment is not guaranteed.

Another thing to keep in consideration when comparing car title loans and pay day loans is the repayment schedule. For this, every payday loan company and every car title loan company may differ. Some require weekly repayments, some monthly repayments, and others may have longer terms. Typically most payday loans are due on your next payday and car title loans are paid weekly, except for rare occasions where you can pay them monthly.

Some states have banned or severely regulated payday loans though car title loans remain a legitimate option. Typically you will want to make sure that any company you are considering for a payday loan or a car title loan is licensed in the state where you live. You should also check with the Better Business Bureau and make sure they are registered and find out how many complaints they have against them. Because of the nature of the industry it is not uncommon to have complaints but you will want to find out as much information in advance as you can.

After you do your homework you can decide if you want a payday loan or if you prefer car title loans.