There are quite a few online articles detailing “alternatives to title loans”. The majority of these articles don’t provide any real alternative that most title loan customers can take advantage of.
If you are considering a car title loan and are looking for alternatives you have probably read a few of these articles and been disappointed with the information provided.
We’ll do our best to provide some real and actionable alternatives in this article with some useful information about car title loans.
What is a Car Title Loan?
Before looking at alternatives let’s make sure we understand what a car title loan is. The simple answer is a loan secured by the vehicle. Depending on the specific state you live in, repayment terms can range from 30 days to over a year. Just remember the longer the loan, the higher the total loan cost.
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.
Some lenders are also offering longer term loans, which, when combined with the high interest rate can be very costly. In some cases a $2,000 loan can cost over $10,000 to repay. This is definitely not recommended.
First, we cover the so called car title loan alternatives and why they are primarily useless, and then provide some real title loan alternatives that are hopefully more useful.
So called “Alternatives” to Title Loans:
The frustrating part about the alternatives provided in most articles is that they generally are not realistic or available options for most people considering a title loan.
Given that, they do not really provide any useful alternative that a borrower can act on to avoid getting a title loan. The most common so called “alternatives to title loans” include:
1. Get a personal loan from a bank:
This is almost always listed as an alternative to title loans; usually as the first alternative. If you read one of these articles and tried to get a personal loan from a bank, we know how you feel.
Many of these articles are published by finance related companies that should know how banks work, yet this is still almost always listed as a real alternative.
This alternative is obviously written by someone either out of touch with reality, has 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 and if they do they are usually secured by home equity or other financial assets.
2. Get a cash advance on a credit card.
This is another useless alternate to most seeking a title loan. As if the borrower has this option and doesn’t know it. Another article written by someone with a large available credit line or being compensated by a credit card company for writing the article.
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. The interest rate on the cash advance will be lower than the large majority of car title loans.
3. Borrow from friends and family:
Another useless alternative. Most people either can’t or don’t want to borrow from friends or family. We don’t need to go into detail here.
4. Get a part time job:
Again, not exactly an alternative to a title loan. Most people get title loans to cover emergency expenses.
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 car title loans customers are).
5. Find a Payday Alternative Loan
This is a fairly new one from a few sources and is, unfortunately, just as useless as the rest. Payday Alternative Loans (PALs) are great alternatives for Payday loans; hence the name.
Unfortunately people are seeking title loans for a reason. Payday loans have a very small limits and may not cover the expense.
Viable Title Loan Alternatives:
There are a few viable alternatives to title loans that we hope are of more use to you than the five listed above that you may want to consider. Car title loans are expensive, so considering every alternative is a good idea.
Viable Alternative 1: Use the Vehicle
There is a viable title loan 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 and even full 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: Secured Consumer Loan
Get a consumer loan secured by the vehicle. Unlike a personal loan from a bank, these loans actually exist from companies like OneMain, Lendmark, and others.
There are likely a few competing lenders in your area, just do a search. This is usually not mentioned as an alternative because these companies did not pay the article authors like the credit card companies.
These lenders will require a credit check and you will need to have OK or good credit. 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 other debt like 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 you may even be able to 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 will check your credit, so find out if there will be a hard inquiry on your credit report before applying.
Viable Alternative 3: Lower Rate Title Loan
The primary reason to find an alternative to a title loan is to avoid the excessive costs that many title lenders charge. The simplest alternative is a lender that charges a reasonable rate with no fees.
This is definitely not something another publisher will tell you about as they have no financial incentive to. Their articles depict title loans as 15-30 day loans with a 300% APR.
We would never recommend such a loan. Find a title lender that does not charge the maximum interest rate in your state. There are completely online title loans with no inspection if that is what you need.
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, borrowing $1,000.00 at 96% APR with no loan origination fee will cost roughly $80 if repaid in one month.
You can calculate other car title loan amounts and terms using the car title loan calculator. There are lenders that charge rates in this range. Shopping around can save you a significant amount of money on a title loan.
Viable Alternative 4: Vehicle Downgrade
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.
Then, as soon as you sell the vehicle, repay the title loan immediately to minimize the cost.
We hope this article provided you with some title loan alternatives and was 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. Make sure the title loan is worth it and makes sense. 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.