There are quite a few articles online detailing the “alternatives to title loans” that provide no real alternative. If you are considering a title loan and looking for alternatives you have probably read a few of these and been disappointed with the information provided. We provide some real, actionable alternatives in this article with some useful information about title loans.
First, what is a car title loan? The simple answer is a loan secured by the vehicle itself. Depending on the specific state you live in, repayment terms can range from 30 days to over a year. Interest rates also vary quite a bit and can be very high, in many cases over 200% APR. Finding an alternative to the lenders that charge the highest rates should definitely be considered.
So called “Alternatives” to Title Loans:
The alternatives provided in most articles are not options for most people considering a title loan and do not really provide them with any useful alternative:
1. Get a personal loan from a bank:
This is almost always listed as an alternative to title loans; sometimes published by finance related companies that should know how banks work. These articles are obviously written by someone out of touch with reality who has either never tried to get a personal loan from a bank or has a long list of collateral and phenomenal credit. Most people considering title loans are not as fortunate as authors of these articles. Banks rarely make personal loans anymore and if they do they are usually secured by home equity.
2. Get a cash advance on a credit card.
This is another comical one. As if the borrower has this option and doesn’t know it. Another article written by someone with a large available credit line. Not everyone has a high limit credit card and not all credit cards allow cash advances. Those that do usually limit the cash advance to a small amount. Additionally, most people considering a title loan don’t have available credit which is one of the reasons they consider a title loan in the first place. If this is an option for you, then great take it.
3. Borrow from friends and family:
Another useless alternative. Most people either can’t or don’t want to borrow from friends or family. I don’t think I need to go into detail here.
4. Get a part time job:
Again, not exactly an alternative. Most people get title loans to cover emergency expenses, so finding a part time job, working enough hours, and waiting for the paychecks to cover the expense may not be an option. This assumes the borrower isn’t already working multiple jobs (many of our customers are).
There are a few viable alternatives that we hope are of more use to you than the four listed above.
Viable Alternative 1:
There is a viable alternative that most articles overlook that does not involve a bank or credit card company. If you are considering a title loan then you must have an insured vehicle with equity in it. You can turn the vehicle itself into the source of funds. Driving part time is now an option in most parts of the country for several transportation and delivery companies. Additionally, you may be able to rent the vehicle when you’re not using it. There are now companies that provide peer to peer car rental, so you may be able to generate extra cash from your vehicle without having to drive.
Viable Alternative 2:
Find a title lender that does not charge the maximum interest rate in your state. Competition in this space is increasing and there are plenty of smaller lenders offering rates at a fraction of the large lenders that still charge 200%+ APR. As an example, Fast Title Lenders charges 8% per month which is 96% APR. There is no loan origination fee and no pre-payment penalty. Borrowing $1000 will cost roughly $80 if repaid in one month; find out how to get a title loan. There are other lenders that charge rates that are slightly higher but still considerably less than the maximum. Shopping around can save you a significant amount of money.
Viable Alternative 3:
Get a consumer loan secured by the vehicle. Unlike a personal loan from a bank, these loans actually exist from companies like OneMain and Lendmark. You will need to have OK credit and the process takes a little longer than a title loan but the interest rate can be much lower when compared to lenders that charge the maximum (200%+ APR). With a consumer loan you may also be able to consolidate credit card debt or medical bills into the loan secured by the vehicle.
This can help you get the cash you need for the emergency and may lower your monthly expenses. As with a title loan, it pays to do some research for one of these loans. Just be aware that unlike title lenders these companies may check your credit, so find out if there will be a hard inquiry on your credit report before applying.
Viable Alternative 4:
Consider selling the vehicle and buying a less expensive vehicle. Depending on the year, make, model, and mileage, selling the vehicle and buying a less expensive one could be a way to raise cash quickly without needing to repay a loan at all. If you need the funds immediately you could get a title loan the same day you list the vehicle for sale. Just let your lender know what you’re planning on doing and make sure they’re willing to work with you.
We hope you found this article more useful than most others that provide the first few alternatives. If you are considering getting a title loan, take some time and do your research first. It is worth a few minutes reading the complete guide on how to get a title loan. Definitely consider all alternatives and if you find a better option than a title loan then take it. If you do get a title loan borrow only what you need and make sure you have the income to support making your payments on time.