From time to time, all of us find ourselves in need of money that we simply do not have at the moment.  It could be due to an emergency such as medical problems or car troubles or when a bill must be paid today.  Most people turn to their savings, credit cards or perhaps get some help from family or friends.  But when these options are not available, getting money quickly becomes quite a challenge.

Two viable solutions for obtaining money quickly are payday loans and car title loans.  Both have their pros and cons but the advantage of both types of loans is that a person can usually get money quickly even if he or she has bad credit or no credit.


How Payday Loans Work

Payday loans are only available in 36 states, one of which is Nevada.  The process for obtaining a payday loan is rather straightforward and easy.  The process begins with the borrower writing a post-dated personal check to the lender for the amount they are borrowing plus any finance fees.  Next, the lender advances money to the borrower for a certain amount of time, typically 14 to 30 days or until the borrower’s next payday.

Once that time has lapsed, the borrower must pay the funds back.  They also have the option to extend the loan by writing another post-dated check that includes an additional financing fee. If the loan goes into default or is not paid back completely, more financial charges and fees will accrue.


The Pros and Cons of Payday Loans

The “Pros” of payday loans include:

  • Payday lenders will not check credit reports in order to qualify a person for a loan. However, they will check reports for past or present loans.
  • Obtaining a payday loan only takes 30 minutes or less, which is helpful in emergency situations like when a car break downs or to avoid a power shut-off.
  • Loans aren’t reported to credit bureaus, so defaulting on a loan won’t negatively impact a borrower’s credit rating.
  • The money from a loan can cover bills, which can prevent bank overdrafts, bounced check fees or credit card fees.

Some negative aspects of payday loans include:

  • They are only available for a short period of time.  If a loan for several months or longer is needed, it would be wise to seek a different source for a loan.
  • Low loan amounts.  An average payday loan is only around $375.
  • The borrower must have full time employment.  Payday loans aren’t offered to those with part time employment, on social assistance or who are receiving unemployment benefits.
  • Interest rates of payday loans have an average APR around 432%.


How Car Title Loans Work

To obtain a car title loan, borrowers must first present their car title to the lender.  The lender offers a loan that is a certain percentage of the vehicle’s estimated value.  The title is then kept and held by the lender and used as collateral for the loan.  This collateral means that there’s no risk to the lender, thus approval rates for title loans are extremely high.


The Pros and Cons of Car Title Loans

The advantages of car title loans include:

  • Greater loan amounts. Title loan lenders offer an average of $1,800 per loan, sometimes much more.
  • Title loans are processed quickly and you can have money in 30 minutes or less.
  • Employment is not a requirement. The only thing that is needed is a vehicle and vehicle title.
  • Although title loans have a duration of 30 days, they can be extended a total of 7 times, meaning they may last as long as 210 days.

Some negative aspects of car title loans may include:

  • The duration of a loan can be short, usually only lasting about 30 days.
  • The average APR of a car title loan is 192%, less in certain states.
  • Paying a large amount of money back in a short period of time may not be possible.
  • Cars are repossessed and sold if loans go into default.
  • If cars sell for less than what is owed on the loan, then the borrower may have to pay the difference.


Do Your Due Diligence Before Deciding

According to the Pew Charitable Trusts, 5% of Americans use payday loans to help with monthly bills while only 1% use title loans for the same purpose. Restrictions on paydays loans have increased recently, making title loans a better option in certain cases.

Like any loan, car title loans and payday loans have their advantages and disadvantages. But for those who need money immediately and have no other options, title loans and payday loans can be very helpful and timely financial resources.  As with any loan, it is best to do your research to find the loan and lender that will be best for you.