Title and personal loans are the two most common loan options that people would consider. They are two different types of loans with title loan being a secured loan and personal loan being an unsecured loan. Title loan as it name says requires your car title as collateral. The amount you can borrow will be based on the value of the car in the market.
Since you are already using your car as collateral, the lender will have no need to look at your credit score and you don’t need to produce a payslip for income proof. Since the lender will not perform any background check, you can get approved no matter what type of credit you have. In title loan, the car’s title will be in the possession of the lender until you fully clear of the loan amount. You will still be able to use your car to do your daily chores after the title loan gets approved.
Title loans are short term loans and usually, must be repaid within a one month period. They usually have high-interest rates that can reach up to 300%. Some lenders allow you to extend the loan period to give you more time to pay off the loan at additional fees. Before the title loan can be approved, the lender will come over to your house to appraise the vehicle. The process of the vehicle appraisal usually just takes a few minutes.
Personal loan, on the other hand, requires you to show proof of income and you must have an acceptable credit score to get approved. They want to make sure that your job is bringing in enough income so that you will be able to repay the loan. Nowadays, if you find it hard to get a loan from the bank, you have the alternative of going online to obtain the personal loans.
Online personal loans have much cheaper interest rate and lower credit score requirement. It is even possible for you to get a personal loan if you have a bad credit rating or in a post bankruptcy situation. Unlike title loans, you don’t have to show up in person to the lender. The P2P loan is an example of a personal loan that allows you to apply for a loan anonymously without having to reveal your identity.
A title loan is for those who don’t have income proof and good credit score but have a car that can be used as a security deposit. A personal loan is for those who have a stable income proof for 3 – 6 months as well as a credit score that is good enough for them to get approved by the lender. No matter whether you decide to get a title or personal loan, make sure that you have the funds to pay back before applying.