Loans and Homes: Car Title Loans versus Home Mortgages and More

A calculator sits on top of a piece of paper for loan calculations.

One of the most popular types of loans today is the car title loan. This kind of loan has been on the rise since the dawn of the 21st century. In fact, according to research done by the Pew Charitable Trusts Research, in 2015 alone an estimate of approximately 2 million Americans took out automobile title loans. 80% of said vehicle owners opted to further renew their car title loans using the “rollover” feature that almost all car title loan companies offer.

The popularity of this kind of loan is owed to several factors. Among those factors are convenience and high acceptance rates. Compared to other types of loans, are car title loans really worth the hype? Read on to find out more.

1) Home Mortgage Loans

According to Mortgage Calculator, a home mortgage loan is a kind of “loan secured by property or real estate. In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within a certain time frame for a certain cost.”  

This kind of loan agreement necessarily involves a real property, most commonly, the debtor-mortgagor’s home. In case of non-payment or default on the part of the debtor at the maturity of the loan, the creditor-mortgagee will have a legal claim against the mortgaged home for the payment of the debt.

The advantage of this kind of loan is that home mortgage loans typically have lower interest rates compared to other types of loans. The downside though is that your collateral is your own home. Defaulting on this may leave you homeless.

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2) Car Title Loans

As stated above, car title loans are very convenient. Car title loan requirements are very basic and straightforward. Unlike a payday loan, car title loans do not require the debtor to have a current bank account or a credit card. You only need to present proof of identification such as a driver’s license, military ID, passport or state-issued ID.

Of course, car title loans require an absolute ownership of the vehicle that will serve as collateral. This is to guarantee repayment in case of the debtor’s default. You don’t even have to have a perfect credit rating in order to obtain a car title loan. Almost all car title loan companies are very flexible and agreeable in their terms. Another good thing about car title loans, besides the fact that they are fast and easy, is that lots of car title loan companies offer an online mode of payment, which is very expedient and fitting to the fast-paced lives we live.

3) Personal Bank Loans

Personal bank loans are probably one of the oldest forms of loan out there. A loan of this kind attracts people because they do not (or in other cases, rarely) require any collateral to guarantee the loan. The downside of this scheme is the higher interest rate. Because it does not require any collateral, the risk of non-payment or default is higher. In order to offset this peril, banks usually impose a high interest rate.

4) Payday Loans

A payday loan, according to Investopedia, is a type of short-term borrowing where a lender will extend high-interest credit based on a borrower’s income and credit profile. A payday loan principal is typically a portion of a borrower’s next paycheck. Most payday loan companies require the debtor to have a current bank account or a credit card. An advantage of payday loans is that it is a fast source of money.

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Often payday loans can be approved and given to you in just a matter of hours. Outweighing this advantage however, is that loans of this kind have extremely high interest rates. As a matter of fact, payday loans more often than not charge higher interest rates than standard bank loans. Default in paying payday loans can sometimes lead to the loan amount doubling or tripling. Moreover, most payday loans are only issued for passably small amounts. If you need a larger loan amount, payday loans may not be the best option for you.

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