From time to time, we all find ourselves stretched for cash.  Maybe your car broke down, or your water heater isn’t work. The unexpected always seems to happen when money is tight. When this happens to you, there are a variety of options, but do you know which option is best based on your needs? Do you know the difference between a signature loan and a title loan, for instance? Luckily, these and many other options are easy to understand. Figuring out which is the best for you is the biggest hurdle when you need money now.

Payday Loans
1. Payday Loans

Payday loans are perhaps the easiest way to get cash quickly. It’s as simple as writing a check which the lender will cash at a predetermined future date.  The date is usually determined by when you’ll receive your next pay check.  After all, that’s how this lending strategy got its name “Payday Loan”.  To qualify, your lender will verify that you have a regular income and an active checking account.  Typically, money can be in your account within an hour.

Advantages of Payday Loans

  • Your credit score doesn’t matter, since no credit check is required to qualify for a payday loan.
  • It often takes less than an hour to get the money.
  • Many lenders offer an online loan application.  Upon approval, funds are deposited directly into your account.
  • There’s a one-time fee rather than an ongoing interest accrual.

Disadvantages of Payday Loans

  • There’s a limit on borrowing.  California only allows up to $300 per loan.
  • The loan is repaid in one lump sum, no installments.
  • Some states don’t allow payday loans.
  • Payday loan repayments aren’t reported to major credit bureaus so this won’t serve as a credit-building strategy.

2. Title Loans

Title loans are given based on the car you drive. If you own your vehicle, lenders will provide you with a loan linked to the value of your car or truck. You’ll need to present some form of income and have an active checking account. The lender will likely inspect your vehicle before approving the loan, but bringing it to the lender’s office will speed up the process.

Advantages of Title Loans

  • You get the cash while you keep driving your car.
  • Your credit score won’t matter for getting approved on a title loan.  No credit and low credit scores are not excluded from consideration.
  • The approval process is quick and typically, you’ll have the money the same day you apply.
  • Payments are made in installments, ranging from 24 to 36 months.

Disadvantages of Title Loans

  • You’ve pledged your car as collateral, so it cannot be sold until the loan is repaid
  • Many lenders will assess a hefty fee on delinquent payments.
  • You will be responsible for the all costs associated with title transfers.
  • Your insurance premium may rise, as you’ll need to fully insure the vehicle throughout the term of the loan.

3. Borrowing From Friends or Family

Borrowing Money From Friends and FamilyBorrowing money from friends or family is very common. In fact, 42% of people who suffered from financial problems during the Great Recession admitted to doing so.

Borrowing From Friends or Family Pros

  • Most often, if your family member or friend has enough cash available, they’ll be willing to help you out.
  • You’ll have more flexibility with repayment.
  • Unless your uncle is a loan shark, chances are you’ll pay no or low interest.

Borrowing From Friends or Family Cons

  • It can be very awkward to ask your family or friends for a loan.
  • Repayment issues can damage relationships.
  • If you pay timely, there’s no credit score impact as these types of loans aren’t reported to credit bureaus.

4. Home Equity Loans

A home equity loan is much like a title loan — except you’re borrowing against the value of your home rather than your vehicle. It’s often called a second mortgage, and if you owe less than your home is worth, you may be able to get one.

Home Loans

Advantages of Home Equity Loans

  • If you’ve built up equity in your home, you may be able to get large amounts of money.
  • Most home equity loans carry lower interest rates compared to other loans.
  • Some interest may be tax deductible for certain borrowers.

Disadvantages of Home Equity Loans

  • Your credit history plays an important part in the loan decision.  A low credit score may make a home equity loan impossible.
  • Your home is your collateral.  If you fall behind in payments you risk foreclosure.
  • A home equity loan requires processing time and expense.  You will pay closing costs and potentially a home appraisal.

5. Signature Loans

Signature Loan

It’s called a Signature loan for a reason – your signature is your promise to pay.  There’s no collateral involved.  They’re often referred to as “good faith loans” because the lender is trusting the borrower to repay even with no collateral. These loans can be used for any purpose. Some lenders make rapid decisions, while other lenders may take three to five business days for a determination.

Advantages of Signature Loans

  • No property is put at risk.
  • You can use the money for whatever purpose you choose.
  • The loan is repaid in installments ranging from 24 to 36 months.
  • Many lenders offer an online option.

Disadvantages of Signature Loans

  • A credit check is required. If your loan is declined, it may have a negative effect on your credit score.
  • As this loan is based on trusting you to repay it, the lower your credit score, the higher your interest rate may be.
  • Your loan provider may not report your payment history to a credit bureau. In this case, an excellent payment history won’t help raise your credit score.

Choosing the Right Loan Is Important

Regardless of your current financial situation, picking the right loan is imperative. While each have their own advantages and disadvantages, there’s no doubt that one will fit your needs better than the others.

No matter how hard you work, it’s nearly impossible to prepare for every financial possibility. Armed with this information, you can find the financial help to get you through these times. Contact us today if you need cash fast.

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