Is this the same as a payday loan?

A car title loan uses your vehicle to secure the loan. A payday loan requires no collateral.

In order to get a car title loan, you have to give the lender your car title. At most, a car title loan will lend you a fraction of the resale value of your car. With a payday loan, you don’t need a collateral to secure this loan. If you pay back your car title loan in full and on time, you get your vehicle back. If you pay back your payday loan in full and on time, everybody’s happy.

A car title loan is secured by your vehicle as the collateral. So, if things go wrong and you are late or miss a payment on your title loan, your lender will sell your vehicle to pay off the loan. If you are late or miss a payment on your payday loan, the worse case scenario is that you have to owe more money. Personally, I would prefer to have to pay more money back than to lose the vehicle that I need to go to work or school.

As for a comparison of the financial charges of title loan vs payday loan, the rates both fairly high although title loan is slightly lower, because you are using your vehicle to secure the loan. The difference in rates is in the range of tens of dollars, so, only a small amount, considering that you could lose your car if you don’t make timely payments.