Auto Equity Loans Vs. Title Loans

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When you need cash fast and you own a car outright (no liens on the car), you have different options available to use your car as collateral to secure a short-term cash loan. For many people, especially car owners with bad or poor credit, this represents a good way to fulfill some immediate financial obligations.

Auto Equity Loans

Auto equity loans are very popular in the United States. In fact, most check cashing businesses offer auto equity loans to car owners who are willing to collateralize their vehicle. Loans of this kind have to be paid back in a certain period of time and you are charged interest on the loan amount that's outstanding. If you don't pay the loan back in the specified period—by the end of the “term”—then the lender has the right to take your car. These types of loans are typically handled in face-to-face transactions.

Quick Cash Auto Loans

There are also quick cash auto loans for vehicle owners. This type of car loan allows you to borrow up to $2,500. Quick cash auto loans can be applied for online, and while there isn't a credit check, you do have to own your car outright and have auto insurance coverage on the car you're using as collateral for the loan. Typically, quick cash auto loans have a term of 30 days, but can be extended for an additional fee.

Title Loans

Title loans require you to sign over the car you own outright to secure the loan. Car title loans usually have a 30-day term and must be paid in full at this time or you can lose your car. While a title loan does not require a credit check, it does require income verification—usually by showing at least two recent pay stubs.

Advantages

Generally speaking, using your car as security is a quick and easy way to obtain cash fast. Equally enticing is the fact that credit checks are not performed, so those with less than stellar credit reports can enjoy peace of mind that a low credit score won’t disqualify them.

Disadvantages

There are several disadvantages to these types of loans. First, the interest rate you pay is typically a lot higher than other types of loans and even more than some consumer credit cards. Some charge as much as 25 percent or higher. The second disadvantage is that if you don't pay the loan back in time, you can have your car repossessed. With that comes a third disadvantage: there is little state regulation of car title lenders. So if you run into problems, you may have a difficult time getting a fair, speedy resolution.

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