In this article we take a look at car title lenders vs. the payday cash loan lenders. This comparison will include collateral, cost, payback, state regulations, and legislation, restriction, requirements and which to choose.
Regarding collateral, payday cash loan lenders require a personal, postdated check as the collateral for a payday loan. And car title lenders require the title to your car or other vehicle, which they then put a lien on. They also require a duplicate set of the keys in case they end up having to repossess it.
Payday loan lenders in most of the state usually charge about $15 for each $100 they loan, which makes the annual interest rate about 400 percent for the average two-week loan. The maximum loan amount is usually about $500. This compared to car title lenders who usually charge about 300 percent interest and fees including a membership fee and a small fee for recording the lien they put on the title. The maximum loan amount usually is about $2,500.
Usually cash advance loans are due in about two weeks, or whenever the borrower gets their next paycheck. In most of the states that offer car title loans, they are due in 30 days. In Virginia, the title lenders work under open-end credit laws. That means there is no set due date, but the lenders can't charge interest for the first 25 days of the loan. In some states, the title lenders keep all the profits when they sell a car or other vehicle that has been repossessed.
The fast payday advance lenders operate in 37 states compared with only 21 states that have the car title lenders. And a dozen of the states have limited the annual interest rate on all small loans. Usually the maximum amount is 36 percent so both types of lenders don't do business in those states.
In 2008, eight states are considering either new legislation or tougher regulations for the various car title lenders. Before that in 2007, 16 states took on the vehicle and car title lenders. Six of those states passed regulations.
In 2006 congress passed a law that took effect in 2007 prohibiting all of the payday lending companies, vehicle title lenders and tax refund anticipation operations from charging members of the military or anyone in their families more than 36 percent interest on any loans.
Both no credit check payday loans and no credit check car title loans are fast and easy to arrange and yes, both require no credit check. The quick cash payday loan online stores and brick and mortar stores both require an open checking account and your identification. The car title lenders require the borrower owns the car or vehicle they are using for collateral.
Both the payday cash loan lender and car title lender are often mentioned as the only option for those who might not qualify for a loan from their bank or a credit union. And they both rightfully claim that their loans are only for short-term, emergency use instead of any long-term financial solution.
If you have to make a short term loan it's easy to see that the payday cash loan advance would be the lesser of two evils. The interest may be a little higher but the additional fees may eat up the difference. The cash advance loans can be helpful if they are only used for a temporary situation in which you KNOW you can pay them back when due.
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