That said, title loans are still notorious for charging high interest rates

That said, title loans are still notorious for charging high interest rates

The main advantage of a title loan is that you can use the value in your car to get a better loan offer. If you have bad credit, you’re very likely to face high interest rates when applying for an unsecured personal loan or payday loan. But, no credit check payday loans Athens since a title loan limits the lender’s risk to some extent, you can get a loan with a much more favorable interest rate regardless of your credit history.

Many lenders charge monthly interest upward of 25%, which equates to an APR of more than 1,000% over the course of a year. That APR may be better than payday loan offers, but it’s still 10 times higher than what most financial experts recommend as affordable.

It’s important to weigh the fact that you could lose your car if you fail to make your title loan payments. Although taking a hit to your credit because you failed to make payments on a payday loan is bad, it often isn’t as financially devastating as losing your vehicle. So, think carefully about whether you can consistently make payments on a title loan before going this route to borrow money.

Getting Cash Quickly with Title Loans

A potentially important benefit of title loans is that you can get cash quickly. Many lenders have walk-in locations where you can have your car appraised and get a loan offer approved in 30 minutes or less. You walk out the door with cash and get to drive away in your car, even though the lender keeps your title.

If you’re up against payment deadlines or need money immediately to cover emergency expenditures, getting a same-day loan can make a huge difference.

Alternatives to Title Loans

There are a few alternatives to title loans, many of which may be better options to get money depending on your situation.

  • Payday Loans – Payday loans can put money in your pocket within 30 minutes and many lenders don’t require a minimum credit score. Interest rates are often higher than for title loans, but you won’t lose your car if you miss payments. However, payday lenders do typically require that you have a job and minimum annual income. Title lenders, on the other hand, may not require you to be employed.
  • Pawn Shop Loans – Title loans are extremely similar to pawn shop loans in that you’re putting up personal property as collateral for your debt. Pawn shop loans will accept jewelry, appliances, or other valuables as collateral rather than your vehicle. Pawn shop loan interest rates are typically higher than title loan rates.
  • Personal Loans – There are many lenders who are willing to offer unsecured personal loans even if your credit is bad. These may take up to several days to be approved, but interest rates can be 10 times less than what you’ll be offered with a title loan. If you miss a payment, your credit score will drop, but you won’t lose any property or your car to repossession.

Title Loans by State

Title loans are regulated to a much greater extent than other types of loans by many state governments. In fact, auto title loans are only available in 23 states as of this year.

Across those states, the minimum and maximum amounts that you can borrow, the maximum interest rate you can be charged, and the fees that can accompany your loan vary widely. Some states allow you to borrow up to $25,000, while others only allow title loans up to $10,000. Check your state regulations or talk to a lender to find out what title loan options in your area are.

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