The world of short-term lending can get a little bit confusing. There are title loans, TNL car title loans, auto title loans, and pink slip loans. On top of that, lenders also offer payday loans. Even though it sounds like there are a lot of different types of loans, all of the loans listed above are the same except for payday loans. They all have one thing in common: they use the title of a vehicle as collateral. In essence, the person borrowing the money agrees that if they don’t pay back the loan, the lender can repossess their vehicle. The title acts as a security deposit, ensuring that the borrower pays on time. Payday loans, on the other hand, are short-term loans that are given out to borrowers based on their income. To qualify for one of these loans, the borrower has to show the lender a copy of their pay stub or some other proof of their income.
Now that you have a better understanding of the difference between payday truck loans and car title loans, the knowledgable pros here at Tio Rico Te Ayuda want to discuss why car title loans are a better option than other types of short-term loans.
Fast Cash With No Credit Check
Auto title loans usually take about a week to go through. As part of the borrowing process, the borrower uses the title of their car, truck, or another vehicle as collateral for the loan. If they are late with their payments or if they don’t pay the loan off, the lender can then repossess their vehicle. Loans like these offer a couple of distinct advantages. First, the borrower can get their money almost immediately. Second, anyone can qualify regardless of their credit score. In fact, most lenders don’t even conduct a credit check.
Drawbacks Of Payday Loans
While payday loans do offer some advantages, there are some major drawbacks, as well. The section below highlights some of the key differences between payday loans and car title loans:
- Payday loans usually have higher fees, making them more expensive for borrowers
- Since they cost so much, borrowers may struggle to pay them back
- Getting a payday loan takes quite a bit of time
- The annual average principal rates on these loans are high, maxing out at about 25%
- Borrowers can easily damage their credit if they are unable to pay back the loan