For anyone with a low credit score, getting a quick cash loan can be challenging. There are two options, payday loans and car title loans, which are available as long as you have either a job or a car (that is paid for).
If your money needs are small – less than $1500, and as little as $100 – then a payday loan is probably your best choice. The rules vary by lenders, where the borrower resides and how much the borrower earns at his or her job. But by borrowing against a paycheck, the payday loan can be fully sufficient for paying bills that might be due soon or for purchasing an item that is essential or on sale. A car title loan will always be for less than the book value of the car, but depending on that value (2001 VW versus 2010 BMW) the loan will usually be for a larger amount of money (more than $2000).
There are three things to keep in mind regarding the advantages of payday loans over car title loans:
No collateral required means no property risk. With a payday loan you are only promising to repay it from your future income. No home, no car, no motorcycle, no RV and no motorboat are going to be lost in such a loan if you are unable to repay it.
Smaller loans reduce repayment burden. If a car title loan is for $5000, that’s $5000 with interest that you will have to repay. That might be hundreds of dollars per month for many months, depending on the specific terms of your loan. With $500 payday loans, you might pay it back in one or two or three pay periods, done in just a month or two and at a lower net-cost of borrowing overall.
Use only as a short-term means to cover necessary expenses. By getting a smaller payday loan, it forces the borrower to pare back expenses and cover only what’s absolutely necessary. A larger ($5000?) car title loan might tempt the borrower to buy non-essentials.
The choices are entirely the borrower’s, of course. Choose wisely.