Short term loans are perfect for situations where you want a small amount of money—but urgently. Banks, unfortunately, do not offer small dollar loans and the approval process is not quick either.
For anyone who cannot qualify for a traditional loan or need funds fast, we want you to know that you have alternative borrowing options like Title Loans or Pawn Shops.
Both of them help you get the cash you require, but they work very differently. Naturally, one of these might be a better choice for you depending on your needs and circumstances.
In this article, we are going to compare the pros and cons of taking online title loans and pawn shop loans. You will get to understand how each of them work and the key difference between them, ultimately helping you choose a loan that suits you best.
How Does Taking Title Loans Online Work?
What Are Title Loans?
Title loan is a short-term secured loan which uses your car or vehicle’s title as collateral. The lender places a lien on your car title and has the right to take possession in case you default on the loan.
You’ll be able to borrow the market value of your vehicle, which can be repaid in either a lump sum or monthly installments depending on the lender’s policies. Most lenders allow you to keep using your car while you’re still repaying the loan amount.
A lot of lenders have moved to accepting applications online, which makes it even easier to apply and get the funds you need. At times, the entire approval and documentation process takes just a few minutes and you can receive your loan on the same day.
There are platforms and websites that further simplify this process for you—by letting you get pre-approved with multiple lenders in a single loan application. Think of it like saving time and effort as compared to applying with each lender individually.
Check out our website to get low interest title loans, filter out bad lenders with high rates and avoid risky loan terms.
How Do Title Loans Work?
You can apply for a title loan online or at a lender’s storefront. Usually, it’s best to apply online because it is convenient, fast, and easy. Wherever you are, whenever you think “I want to get a loan,” getting approved is just a few clicks away.
Once you submit your loan request, a lender estimates what your car is worth based on its make, model, year of manufacture, and condition. This helps them determine the value and decide on the loan amount up to which you may borrow.
Understanding Pawn Shop Loans
What Are Pawn Shop Loans?
Pawn loans are similar to title loans in the sense that they’re secured loans too. Instead of the car title being collateral, you can trade items of value to get a loan. The shop owner keeps the item and you’re supposed to repay the loan within a set time frame. If you fail to pay back until the due date, the lender can then forfeit the item you used for borrowing money.
Here’s what you may pawn:
- Jewelry
- Musical Instruments
- Firearms
- Watches
- Antiques
- Electronics
- Precious Metals & Coins
- Collections
- Bicycle
- Designer Goods
- And more
How Do Pawn Loans Work?
With pawn shops, you will usually need to visit the store with the item which you wish to trade. While there are some pawn shop owners who also have an online store, the options are few. You can take what you wish to pawn to their store, they look at it and tell you the amount they can offer.
You can reclaim the item once you have repaid the loan plus interest. Unlike title loans, you aren;t expected to own a vehicle upfront. These are no credit check loans as well, since your loan amount is based solely on the collateral.
Title Loans Online vs Pawn Shops
Loan Amounts & Borrowing Limits
Title loans generally allow you to borrow higher amounts because you’re putting up a vehicle as collateral. If what you’re pawning is of high value, you will be able to borrow larger amounts.
But often, we don’t have antiques or items of high value, so pawn shops are fine until you wish to borrow only smaller amounts.
Approval Process & Speed
As we mentioned above, with most pawn shops you’ll need to physically visit their store. With title loans however, you may borrow without leaving your home. That too, you will be able to get approved within minutes of applying and possibly get the funds within 24 hours.
That’s the key difference when comparing title loans vs pawn shops.
Interest Rates & Loan Terms
While pawn shops also allow you to pawn your car for getting a loan, car title loans come with lower interest rates and fees. Moreover, you may keep using your car unlike pawn loans where you leave the item at the owner’s store.
Risk of Losing Collateral
When it comes to the risk, both of these loans are tricky work. As long as you’re confident you’ll be able to repay, your collateral is safe. Pawn shops usually offer shorter repayment periods at higher interest which can make it impossible to pay back on time. This results in you losing what you pawned.
Pros and Cons of Title Loans Online
Let’s understand what the benefits of choosing a title loan are and what you’re actually risking in exchange:
Pros of Title Loans
- Higher loan amounts
- Fast online approval
- Lower interest rates
- Keep your vehicle while repaying
Services like MyPaydayLoansOnline help you choose the best title loan at no credit checks, no extra documentation, and lower interest rates quickly.
Cons of Title Loans
- You must own the car
- Risk of losing your car if you cannot repay
Pros and Cons of Pawn Shop Loans
Now let’s understand what you’re gaining and putting at stake when borrowing from a pawn shop:
Pros of Pawn Loans
- You need not own a car
- No credit checks
- Quick cash
Cons of Pawn Loans
- Smaller loan amounts
- High interest rates and fees
- Losing the pawned item if you can’t repay
Which Loan is Right for You?
When you look at it simply, title loans are the better way to go if you’re looking to borrow higher amounts at lower interest rates. Whereas, the only reason you should go for a pawn loan is when you do not have a car or only need very small amounts of cash.
Whichever option you choose, getting in trouble is still possible if you don’t compare multiple lenders or pawn shops. Choosing the very first loan offer is like buying groceries randomly from the first closest store to your home (when the rates were lower at another store just a block away).
We recommend you to always keep your options open, shop around for a while, and then settle for rates that seem straightforward and fair to you. Before borrowing, always make sure that your income can comfortably support the repayment and the structure fits into your monthly budget.
For getting affordable title loans online, you can always choose our website to compare loan offers for free. You’ll be connected with multiple lenders who are offering good terms and choose from that.
To protect you, we filter out lenders who are charging too much interest or aren’t safe to borrow from. All you need to do to get started is provide us with an email (to contact you) and select the loan amount you need.
Final Thoughts
Now that you know what makes taking title loans online and choosing pawn shop loans different, you’ll be much clearer about which one to take. The most important factor when choosing is to evaluate the risk involved in both of them. On top of that, you also need to settle for only the best interest rates, clear loan terms, and fair repayment schedules.
Got questions? Feel free to write to us in the comments below and we’ll get back to you.
Frequently Asked Questions
Can I refinance a title loan to get better terms?
Yes. Not all lenders do this but some let you refinance your title loan to lower the interest rates or extend the repayment period.
Which is easier to qualify for—title loan or pawn shop loan?
Both title loans and pawn shop loans are easier to qualify for. However, if your item is not valuable enough, the cash you’ll get can be next to zero.
Which option is better for building or repairing credit?
Neither of these loans report to the credit bureaus so if you’re thinking of getting them to build credit, it’s of no use.
What happens if I pay off my title loan early?
Some lenders allow you to repay before the loan is due without charging you a prepayment penalty. But the opposite is also true, so it is best that you make sure to read the terms before borrowing or signing any documents.
Are there alternatives to title loans for fast cash?
Yes, if you need smaller amounts of cash quickly, you can take out payday loans online. Our website also allows you to find lenders who allow installment repayment on cash advances, and offer longer repayment terms. This way, you’ll avoid the risk of falling into a debt cycle.
How does a title loan affect my credit score?
Most title lenders do not report to the credit bureaus unless you default which means your credit score won’t be affected even if you take a title loan online. However, if your vehicle gets repossessed, it will affect your credit score negatively.
Can I get a title loan on a leased vehicle?
No, to borrow a title loan, you need to own the vehicle outright or at least have significant equity in it.
Do title loan lenders require proof of income?
Some lenders might need income proof however most do not. As long as you own a vehicle, there are no credit or income checks involved.
