Title, Payday, and Personal: Loan Basics for First-Time Borrowers

Woman asking advice about loan

Woman asking advice about loanLoans, regardless of loan type, have at least one thing in common: the borrower needs money ASAP.

Most American adults live from paycheck to paycheck. As a result, in times of high need for cash, they have no choice but to turn to cash lending institutions. Depending on their need, as well as the capacity to repay their cash loans, Americans can choose from different types of loans.

Car Title Loans

Utah Money Center, a title loans service company in Utah, says a title loan is a more affordable option in comparison with other quick loans.

In auto title loans, the lenders only require the title, not the vehicle itself. Meaning, you can still drive your car while you are repaying your debt. The payment is usually due within 30 days or a few months, depending on the amount borrowed.

Generally, a borrower is required to fill an application form and submit the title and photos of the car, and their photo ID. In some cases, they may need to hand over extra keys or purchase a roadside service plan.

Payday Loans

Payday loans usually have high-interest rates and are provided by small-time credit merchants. Nowadays, some lenders allow for online application.

The lenders base the loan interest rate on the borrower’s income and credit profile. Payment is taken from the borrower’s next paycheck, pension, or Social Security.

Borrowers are charged up to 400 percent in annual percentage rate (APR), although most states implement limitations on interest charges. The typical payday loan limit is $500.

Personal Loans

Personal loans or signature loans are repaid within 12 to 60 months. Lenders require bank statements, pay stubs, and credit profile reports. In some cases, borrowers need to present tax returns and W-2 forms.

These loans, provided by banks, credit unions, or online lenders, are unsecured as they do not require collateral. As a result, the interest rates are higher than auto or house loans, ranging from seven to 36 percent APR.

Borrowers should determine which type of loan is best for them. For example, borrowers who really need quick cash can go for a title loan. Those who want to settle their loan in a single payment can go for a payday loan. However, they should be responsible when it comes tot repaying their debt because loan defaults and delinquencies have consequences.