For those in need of some quick cash to help solve a temporary financial bind of any sort, there are a few prominent options out there. Two such options, perhaps the most common in the installment loan world, are known as signature loans and title loans.
At 1st Choice Money Center, we’re proud to offer both signature and title loans as installment loan options, alternatives to harmful, predatory payday loans you might find elsewhere. How do these options compare and differ, and which might be right for your situation? Here’s a primer to help you understand.
Secured and Unsecured Loans
The loan realm contains two broad loan types:
- Secured loans: Those where the amount being borrowed is directly protected by collateral, whether monetary or in the form of property. The borrower puts up an asset of value that protects the lender in cases of nonpayment – in these situations, the lender takes the collateral for themselves if the loan is not repaid according to the conditions laid out.
- Unsecured loan: An unsecured loan involves no collateral in the equation, on the flip side. For this reason, most lenders offering unsecured loans will have to take higher interest rates and fees to make up for the increased risk they’re taking on by giving this loan out with no collateral. In nearly all cases, then, unsecured loans will come with higher rates than equivalent secured loans.
Car title loans, then, are a great example of a secured loan type. The collateral in each of these cases is the vehicle title being used by the borrower, which has value and allows the lender to take a bit of risk when loaning out the money.
Because of this, title loan rates will generally be relatively favorable – the more valuable the vehicle, the better the rates. Title loans can also reach much higher amounts than other installment loan types in many cases, due mostly to the high value of vehicles on the market.
Signature loans, on the other hand, are unsecured loans in nearly all cases. They do not require any specific collateral, only a signature. This can be great for certain people in a rough position where they don’t have much collateral to give, but still need some emergency funds.
On the flip side, though, they tend to come with higher interest rates. These can be mitigated somewhat if you have a good credit score, which the lender will check in advance, or if you have a cosigner to assist you.
To learn more about the differences between signature and title loans, or for information on which might be best for you, speak to the staff at 1st Choice Money Center today.