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Auto title loans might be fast, but the risks often outweigh the benefits. If you’re concerned about losing your car or triple-digit APRs, you might qualify for an alternative that doesn’t carry that risk. And if you’re regularly in need of extra funds, you might also want to look into long-term solutions to help build up your personal finances.
Title loan alternatives with fast turnaround
Title loans aren’t the only way to get money on the same day you apply. But beware: Fast financing is often more expensive. If you want a loan that allows you to save on interest, you might have to wait to get your funds.
Payday loans
Payday loans work a lot like single-payment title loans, where your repayment is due in full plus interest and fees within a month. The main difference is they don’t require collateral. You can often get a payday loan on the same day if you apply in a store. You can also apply for payday loans online, though you likely won’t get your funds until the next day.
Pros
- Same-day funding
- No risk of losing your car
- More online options than title loans
Cons
- Higher APRs than title loans
- Lower loan amounts than title loans
- Not legal in all states
Credit card cash advance
If you already have a credit card, you can also take out a cash advance as soon as you can get to an ATM. Advances tend to come with higher APRs than your typical credit card purchase, though rates are often much lower than any other short-term loan product — starting at around 25%. On top of this, you typically have to pay a cash advance fee, usually around $10 or 5% of the advanced amount.
Pros
- Potentially faster than a title loan
- No collateral required
- Lower APRs
Cons
- Need to already have a credit card
- Cash advance fee in addition to interest
- Lower amounts available than title loans
Compare short-term loans
Updated January 26th, 2020
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Title loan alternatives for bad credit
Have the time to wait longer for your loan? You’ll find several less expensive options that don’t put your car on the line.
Short-term loans
Payday and installment loans are short-term options available to borrowers with bad credit. Installment loans are often in larger amounts and allow you to repay what you borrow over a few months to a year. Each are a viable alternative if you have bad credit and need between $1,000 and $10,000. Neither require collateral, though both are more costly than title loans.
Pros
- Borrow up to $10,000 with installment loans
- Apply online or in person
- No collateral necessary
Cons
- More costly than a title loan
- Risk of becoming trapped in cycle of debt
- Illegal or highly regulated in some states
Payday alternative loans
Some federal credit unions offer payday alternative loans — more commonly called PALs — as an affordable alternative to title and other short-term loans. The application is more involved than a title loan, however. And you’ll have to become a member to get one. PALs also don’t allow rollovers, so there’s no risk of getting caught in a cycle of debt. But that also means your loan is firmly due when it’s due.
Pros
- APRs capped at 28%
- No more than $20 processing fee
- Borrow between $200 and $1,000
Cons
- Limited to three PALs every six months
- Must become a member to qualify
- Not available at all credit unions
Hoe payday alternative loans work
CDFI loans
Some local banks and credit unions are registered as community development financial institutions. CDFIs are nonprofit organizations with a mission to provide financial resources to underserved communities. Some — like the South Bronx’s Spring Bank — offer affordable short-term loan alternatives designed to help improve your overall financial well-being.
Pros
- More affordable than a title loan
- Improve your financial health
- Small-dollar loans available
Cons
- Limited availability
- Typically longer turnaround than a title loan
- Might require collateral
Loans from friends or family
Instead of borrowing from an outside company, you also might want to rely on friends or family for help when you’re in a pinch. You can use a service like LoanWell to draw up a contract that’s legally binding. Or monetize your social network by starting a crowdfunding campaign that you won’t have to pay back.
Pros
- Room to negotiate rates and terms
- Borrow from someone you trust
- Collateral optional
Cons
- Risks ruining personal relationships
- Must have family or friends able to lend funds
4 alternatives that aren’t loans
A loan is a one-time fix that might not be the best solution if you’re frequently short on cash. If you find yourself considering short-term loans often, look into these alternatives first.
1. Take on a side gig.
You don’t necessarily need to apply for another job. Something as simple as taking online surveys or selling those photos you’d normally post on Instagram could make you the couple hundred extra dollars a month you need to cover your personal expenses.
2. Find local assistance programs.
Frequent short-term loan borrowers might qualify for government assistance programs to help cover the cost of basic expenses like food, child care or housing. Find out programs available in your area in our guide to payday loan alternatives.
3. Negotiate with your creditors.
Borrowing to cover your bills? Reach out to your creditors and explain your financial situation. Your creditor might be willing to extend a modified repayment plan, more favorable terms or reduced interest until you’re on solid financial ground.
4. Sign up for credit counseling.
Don’t know where to start? Consider working through your debt with credit counseling. You’ll meet with an adviser to come up with a plan to get your finances back on track. You can find a list of government-approved credit counseling agencies on the Department of Justice’s website.
Are title loans bad?
Not necessarily, though it depends on your financial situation. If you need money fast and don’t have good credit, it can be a cheaper alternative to payday loans.
Title loans often have a high cost per year, but they typically don’t cost more than $10 to $15 per $100 borrowed — if you’re able to pay it back on time.
It starts to add up when you roll over your loan. The more often you renew your loan, the more you’ll pay in interest and fees — and the higher the risk of becoming trapped in a cycle of debt.
More than 87% of single-payment title loan borrowers roll over their loans at least once, according to the Consumer Financial Protection Bureau. And about 20% end up losing their car.
To avoid a tough outcome, make sure you’re able to afford your repayment. If not, consider a more viable alternative.
Bottom line
Title loans involve some risk: You can find yourself caught in a cycle of debt or even lose your car. But they can help when you need money fast and don’t have the best credit. Weighing the alternatives can help you make sure you’re applying for the best option available to you.
Learn more about how these options work in our comprehensive guide to title loans.
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