What are Payday Loans and How Do They Work?

Looking for a last minute cash boost? You need a quick loan that doesn't drag out the application process for weeks, and that's why you're looking into payday loans. You've heard that they're useful for those who need money sooner rather than later. That is true. You can have cash in your hands in one day and defeat the expenses piling up to your eyes.

But how do payday loans actually work? Payday loans allow you to apply for a cash advance based on your previous employment history and paychecks. Since you aren't using anything as loan collateral, the interest rates are high, so you might want to pay it off quickly, with your next paycheck. Of course, you're not required to do so, but interest and fees may end up tacking on more to your final loan bill than you want to pay. Before you jump in feet first to a payday loan, you might want to consider other alternatives. Other opportunities, such as online title loans, are secured by your vehicle title. As an unsecured loan, payday loans may not be able to offer as low of interest rates, and rarely include flexible payment periods.

Are Payday Loans the Best Type of Loan?

Payday loans are attractive when you need cash in a hurry, but title loans can offer the same benefit. And when you choose to get a car title loan instead of a payday loan, you aren't placed into the same high interest rate bracket. Why?

Car title loans have one essential difference: they are secured. Owning a paid off car gives you certain advantages, and one of those advantages is the ability to give lenders your paid-off car title as backing for a loan: hence the name "car title loans." You can still apply and get approved in less than 5 minutes, and you can still get cash in 24 hours. Even better, you don't have to stress over paying back the money within a month, as you would with a payday loan. Car title loans allow you major flexibility when deciding your repayment schedule...and you actually get to provide some input. You don't have to "take what you can get." Not when you're providing leverage for your loan. While payday loans might be more well-known, car title loan benefits knock it out of the park.

Here is a short list of questions you should ask yourself before committing to a loan application, whether it be a car title loan or payday loan:

  • Will this loan provide enough money for me to take care of my needs?
  • Will this loan offer flexible repayment plans?
  • Does this loan give me the lowest possible interest rate?
  • What are the requirements for approval?

Payday loans might only provide cash equal to one paycheck. Unless you have an extremely high-paying job, this cash advance will probably not be enough to take care of your pressing expenses. A car title loan can deliver cash equal to the current worth of your vehicle. This could range from a few hundred, to a few thousand, to tens of thousands of dollars.

What Documents Do You Need for Fast Cash Loans?

Payday lenders will examine your credit score, your employment history and everything in between before they decide you're eligible. Car title loans only require one document: your car title. You will also have to prove your identity by offering a copy of an official ID, but that's normal for every lending situation. You don't have to worry that your credit will affect your chances of getting a car title loan, because it won't.

Now you know a little bit more about payday loans, how to get them, and how other lending options like car title loans compare. If we can help you with additional advice, feel free to call us anytime. We can counsel you on the best direction to take in your present situation and whether or not a car title loan is right for you.

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