Individuals who have low credit scores are rarely given opportunities to borrow more money.
It is the reason why being in a bad financial situation can feel as though it is a self-fulfilling prophecy. Each time you need help, it becomes harder and harder to get that assistance. It is why you may be wondering what options are even available to you.
While you are short of options, you do have some. That is very good news, and a quick analysis of the top two options should help you figure out what you will do when you need quick cash.
Payday Loans and Car Title Loans
The two most popular loans you can get when you have a low credit score are car title loans and payday loans such as a payday advance at Personal Money Network. A car title loan is one where you are putting up your car as collateral, while an online payday loan for bad credit usually comes with a high interest rate to compensate for the lack of credit check.
Understanding the Payday Loan
Many people misunderstand payday loans and begin to fear them. In reality, these loans offer a lot of positives to people who need access to money quickly and with minimal hassles. There are almost no other loans where you can get access to money in days, and not have to even prove your creditworthiness.
With online payday loans for bad credit, you get the chance to borrow anywhere from $300 to $1,500 for a few weeks. Keep in mind that such loans are essentially advances on a paycheck, which means you are expected to pay back the loan within one or two paycheck cycles.
How to Best Use Car Title Loans
A car title loan is a very interesting proposition for people who have vehicles with high values. Say you are in a financial bind because you have lost your job for a few months, but you are hopeful of finding a new one soon.
The issue is that you need money now, and you have no way of getting access to more. If you have a car with a relatively high value, but you do not want to sell that car, you can use it to get a loan.
A car title loan means you are using the car as collateral in case you do not pay back the loan. If you ever stop making payments for a few months, the lender will come to you and ask for your vehicle. They will assume the car title and have it towed to their property.
It may sound scary, but it very rarely happens, as the monthly payments on these loans are very manageable. Car title loans have higher interest than bank loans, but not as high as payday loans. The risk of lending money to someone with questionable credit history is present, but it is mitigated by putting the car up as collateral.
Choosing The Loan That is Best For You
One of the questions we often get from people is whether they should be choosing a loan that is giving them access to more money, or they should pick a loan that has the least risk.
It is a valid question, but one that has a simple answer. If you are someone who is already in financial stress, you cannot afford to take on unnecessary risks. Car title loans are tempting, as you can get a lot of money and more time to pay it back. However, a mistake on your car could cause you to lose your car, which would be disastrous.
Payday loans may not give you as much money, while you have a higher interest rate, and they are due within weeks. But you know where you stand. It is a loan that uses interest rate to make up for the lack of credit check.
If you are a few weeks late with your payment, you pay more in interest. You will not lose your car, which is a tool you use to get to and from work and other appointments.
Rebuilding Your Finances
Those who are in a position where they must choose between a car title loan and payday loan need to understand it is not sustainable in the long run. While you can continue to rely on these loans for a few months, you should not be in the habit of taking them out for years.
The best step you can take is to start saving more money so that you have a fund you can use on a rainy day, or if you encounter an unexpected expenditure. But in the meantime, choose payday loans over car title loans, if the need arises.