There are only a few fast loans; these include car title loans, payday loans, and credit card cash advances. These loans have some common characteristics including both convenience as a benefit and high costs as a drawback. Life is full of uncertainties and being prepared for emergency funding is a necessity today. Understanding how quick loans work and their similarities and differences will save you some time should you need one. It is certainly worth comparing and contrasting these loan types before getting one.
It is also worth analyzing alternatives to these loans before proceeding. This is particularly true for car title loans. While car title loans can be a great way to borrow quickly, they are meant to be short term solutions. Recently, some lenders have been making longer term title loans. We previously detailed what happens to the loan costs when you try to make a title loan a long term solution. If you missed that post it may be worth reading.
Fast Loan Types
As mentioned, this post covers three different fast loan types shown below. We provide a brief description with the benefits and drawbacks of each type of loan:
- Car Title Loans
- Payday Loans
- Cash Advances
Car Title Loans
Car title loans are a way to borrow money using the equity in your vehicle. They are regulated at the state level, meaning the state you reside in will have an affect on the type of car title loan you are able to get. Similarly, the interest rates and fees associated with car title loans will vary from state to state. Even the best title loans are expensive. If you decide to move forward with a title loan, make sure to borrow only what you need and to repay the loan as soon as possible.
Car Title Loans – Benefits:
The main benefits of a car title loan include speed, no credit score requirements, and you keep driving your car. You can usually get a car title loan funded in less than an hour if you visit a lender. Online car title loans can usually be funded within a day. This assumes you have all of your paperwork handy and meet the requirements.
Car Title Loans – Drawbacks
The drawbacks of car title loans include the potential for repossession and high interest rates. Repossession is why it is important to make your payments on time and ensure you can afford the loan. High interest rates can be mitigated somewhat by choosing a lender with lower interest rates. Not all lenders charge triple digit rates and many charge significantly less than the 300% that most articles claim.
Another fast loan option is a Payday loan. A payday loan is a way to borrow money, very short term, until your next paycheck. You will be required to provide detailed information about your employment including your pay cycle and when your next paycheck is expected.
Payday loan Benefits
Benefits related to payday loans include fast funding and not having to pledge your car as collateral. You can usually get a Payday loan very quickly with a short trip to a payday lender. And, unlike a title loan, you will not risk repossession.
Payday Loan Drawbacks
Payday loan drawbacks include a very short term repayment term, small loan maximums, and high interest rates. Usually, payday loans are limited to $500, so if you need to borrow more than that they may not be the right choice for you. Also, the loan period is very short; typically between 2-4 weeks.
The final fast loan type we will cover in this post in a cash advance on a credit card. Of the three loan types this will likely have the lowest interest rate. You use the available credit on an exisiting credit card and borrow on the card in the form of cash. Not all cards allow cash advances and those that do usually have limits.
Cash Advance Benefits
The benefits of a cash advance include generally a lower interest rate than car title loans, flexibility with repayment, and no need to pledge your car as collateral. Credit cards are open ended loans so you can choose to repay the loan in as little or as long a term as fits your budget.
Cash Advance Drawbacks
Cash advances do have some drawbacks including a fee for getting the loan and a negative impact on your credit score. In many cases the fee is 5% of the total amount, regardless of how long you take to repay the loan. Additionally, if you do not already have a credit card that allows a cash advance you will need to apply for and get approved for one. This can take time.
Fast Loan Summary
Fast loans are not ideal, but sometimes necessary. Before getting a fast loan of any type review your options, including potential alternatives, and choose the best one. A credit card cash advance may be the best option if that is available to you. If not, consider the loan amount and length. For very short term small amounts, perhaps a payday loan will work. To consider alternatives, check with your bank to see if they offer Payday Alternative Loans. If you need a larger amount and have a vehicle with equity, a car title loan may be a valid option. Remember not all title lenders are equal and make sure to do your research before getting any loan.