Payday and Title Loans: Loan Options for People with Bad Credit

A Loan ApplicationEmergencies happen. It’s a fact of life. What do you do, however, when you do not have the money to pay unexpected or emergency expenses? If borrowing money from your friends or family isn’t an option, you can choose to get either a payday loan or a title loan. These two options are ideal especially if your credit history isn’t in good shape.

Payday Loans

A payday loan provides you with a short-term cash loan. To apply for this loan, you have to provide a postdated check that indicates the date of your next payday. Additionally, the amount that you will write on the check should include the total amount of the loan and the finance charge.

If you don’t pay the loan on time, the lender will roll your loan into a subsequent two-week term, tack on another finance charge, and charge you with a late penalty fee. Moreover, a payday loan has high-interest rates. You risk accumulating more and more debt if you don’t pay it off. Apart from incurring more debt, it will also affect your chances of obtaining credit in the future.

Title Loans

A title loan, on the other hand, grants you a cash loan based on a percentage of your vehicle’s total value. In exchange, you have to give the title of your vehicle to the lender as collateral. Utah Money Center clarifies that the owner of the vehicle is not really selling his or her to the lender. Eventually, the borrower will get the title back once he or she pays off the loan.  Of course, failure to pay the loan means that the lender will gain ownership of your vehicle.

Should you go for payday loan or a title loan? That’s actually up to you. Before you make the decision, however, it’s best to assess the pros and cons of each loan.