Comparing Car Title Loans and Online Payday Loans in Indiana

blankMaking financial mistakes usually translates into lower credit scores. And it can be difficult to bring the score up, as you need to borrow more money through credit cards or other loans. But you cannot borrow that money as you are not being given credit approval for any loans or credit cards.

It is the reason why individuals with poor credit likely have only two serious options for borrowing money: payday loans and car title loans. You may have read about online payday loans in Indiana that are due back in a few weeks. Now you can get your payday loans in Indiana through online sites, with the money going into your bank account in a few days.

There are also car title loans, where you are putting up your car as collateral to secure a loan. Such loans usually have longer pay back times, which means you can spend six or seven months paying back the loan. But you are putting up your car title to secure the loan, which is a risk.

Below is a comparison of the two bad credit loans.

Online Payday Loans

The best way to describe a payday loan is that you are being lent $300 to $1000 for a few weeks to ensure you can handle your short term financial obligations. When you have the payday loan in your bank account, you can deal with rent, utilities and other obligations.

Such loans are due back within several weeks, as they have a high interest rate. The reason why you have a high interest rate is because there is no credit check. You are not asked to provide your social security number to assess your credit score, as you must only prove you have a job and bank account. That is the only criteria you must satisfy.

A lot of people worry about the short term nature of the loan, but it is one of the advantages. You have to pay it back within a month, so you will crunch the numbers and borrow the amount you can pay back. No one is going to take out a payday loan for $1000 if they know it is not possible for them to pay it back.

Car Title Loans

A payday loan compensates for the lack of credit check with a high interest rate and short payback time. The car title loan does so by having you put up your car title as collateral. It means that you are only getting the loan if you have a vehicle that has a sizeable value.

Those who have older cars that are worth less than $1000 will struggle to get any car title loan. So you must have a relatively new vehicle or one that is considered vintage. Then you can put up the car as collateral and secure the loan, which you will have to pay back over time using monthly installments.

You can keep using your car during the time you are paying back the loan. The issue arises if you miss two payments. Then you are in danger of losing your loan, as the lender can come to you and ask for your vehicle and its title. That is the danger with a car title loan.

Many people also get trapped with car title loans, as they borrow far too much, thinking they can pay it back over several years. Then people struggle to keep up with those monthly payments, which leads them to miss several payments and eventually lose their vehicle. You do not want that to happen.

Stick to the Short Term Loans

If you were to pick a bad credit loan, it should always be the one that is for the short term. Those who have bad credit are likely not the best at making financial decisions. You do not want to take on a $3000 or $4000 car title loan, as you may struggle to pay it back and lose your car.

In contrast, a payday loan is $300 to $600 for most first time borrowers, which you know is due back within three or four weeks. You will crunch the numbers and ensure you have enough money to pay back the loan and meet your regular financial obligations from your next two paychecks.

The long term goal for anyone in your position is to build up your credit score through secured credit cards and eventually regular cards. Then you can borrow money through a multitude of avenues. But if you are choosing between car title loans and payday loans, go with the online payday loan.