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Installment loans vs. auto title loans: What’s the difference?

If you’re in need of some fast cash, installment loans and auto title loans are two options that may help.

When you’re struggling to keep your head above water, a short term loan may seem like the best option, but that doesn’t make the choice easy. Auto title loans and installment loans offer different benefits and drawbacks, so it’s important to calculate the cost and the risks of each. Take time to compare your loan options to find the best solution to your financial problems.

What’s the difference between auto title loans and installment loans?

  • Installment loans are paid back in monthly increments. Although still a short term loan, those terms usually last longer than an auto title loan, ranging from a few months to a few years depending on the purpose and the amount of the loan.
  • Auto title loans use the title of your vehicle as collateral, whether you have a car, RV, motorcycle or boat. You usually have to own your vehicle outright in order to take out an auto title loan. Payments are usually due within 30 days or a few months, depending on your lender and the amount you borrow.

However, both types of loan are similar in many respects. They can be quite costly due to the short turnaround period and high annual percentage rate of interest (APR) and many lenders won’t perform credit checks. If you need a quick injection of cash into your budget, they can be useful tools – but stay cautious. Many borrowers fail to repay by the due date and are forced to roll over their loan amount, making them even more expensive.

Compare installment and auto title loans

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Installment Loan
32% + brokerage fee
$500 - $2,500
3 - 6 months
Currents debts must total less than 60% of income
Min. credit score: 300
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Get approved by different lenders in as little as 60 seconds with any credit score. Access resources to help you work toward better finances.
FlexMoney Installment Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
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Apply online in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Installment Loan
8.00% to 46.96%
$500 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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An online broker with the largest lender network in Canada. Get matched with lenders for free through one quick application regardless of your financial situation.
Mogo Installment Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500

Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
SkyCap Installment Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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An online lender offering installment loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Fairstone Installment Loan
$500 - $25,000
6 - 60 months
Able to make monthly repayments
Min. credit score: 560
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Receive a personalized no-obligation loan quote in minutes without affecting your credit score. Finalize your loan application online and receive your funds as quickly as the same day.
Cash Money Installment Loan
$500 - $10,000
6 - 60 months
Stable source of income
Min. credit score: 560
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Cash Money offers installment loans up to $10,000 for Alberta, Manitoba and New Brunswick residents. Online installment loans are available in Alberta only. Residents of Manitoba and New Brunswick must apply in-store.
Loan Away Installment Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
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Get approved for an installment loan in as little 20 minutes. Get affordable monthly repayments no matter your credit score.

Compare up to 4 providers

Name Product Loan Interest Rate Max. Loan Amount Loan Term Min. Credit Score Requirements
Loans Canada Vehicle Title Loan
Loans Canada Vehicle Title Loan
0% to 29.99%
3 - 96 months
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.

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Installment loans vs auto title loans: How much can you borrow?

Typically between $1,000 to $5,000Typically 25% to 50% of your vehicle’s value

Installment loans may be for less than $1,000 or up to $10,000, but you’ll generally find one somewhere between the $1,000 to $5,000 range.

Auto title loans are a bit different. Since your loan amount is based on the appraised value of your vehicle, what you can borrow will vary by your lender and your vehicle. On average, you may be able to borrow anywhere from $100 to $5,000, or 25% to 50% of your vehicle’s value.

Installment loans vs auto title loans: What are the repayment terms?

Six months to a few yearsDue within 30 days

Installment loan terms range from three months to five years, although the exact term you get will be based on your lender and your own personal financial situation. This gives you multiple months to repay the loan, but it also means you’ll be paying hundreds of dollars in interest.

Auto title loans, on the other hand, are usually extremely short-term loans. Many lenders set the due date at 30 days, although some lenders will allow a few months to fully repay. This, too, can get costly since your lender may charge you rollover fees for extending your loan.

You’ll have more time to pay back an installment loan, but depending on your situation, this may end up costing you a lot more money than an auto title loan, since the latter will have a much quicker turnaround time.

Installment loans vs auto title loans: What are the interest rates?

Typical APRs range from 25% to 100%300% APR and up

Both installment and auto title loans can be very expensive. A three-digit APR is very common. Be wary when applying for either, and make sure you can repay your loan on time and in full. You should also search for a lender that doesn’t have any early repayment fees. This means you can pay your loan off early without being charged a fee, and less time on your loan term equals less money spent on interest, which can reduce the overall cost of your loan.

Installment loans vs auto title loans: How much are the fees?

Varies by lender

You’ll probably pay a fee as soon as you take out an installment or an auto title loan. These may include administrative, processing and insurance fees. Whichever type of loan you choose, fees can add up to a substantial percentage of the loan.

Understand how much you’ll pay in fees before taking out either type of loan. You may be surprized at how much you’ll be paying your lender just to borrow money.

Beware of predatory lenders

Both auto title loans and installment loans are marketed to customers with bad credit. These loans tend to come with extremely high interest rates and have fees that can land you into a vicious cycle of debt. While this is common, a predatory lender has a few more tricks that can deceive you. Here are some things to look out for:
  • Guaranteed approval. There’s no such thing as guaranteed approval for a loan. Lenders who advertise this are often trying to make a quick buck off interest and don’t care about your ability to repay.
  • Pressure to borrow more than you need. You should only take out a loan for the amount you need to get through whatever financial hardship you’re having. Lenders who push you to take out more money aren’t looking out for your interests as a borrower. Remember, the more money you borrow, the more fees you’ll pay.
  • Loan renewal options. You may think that being able to rollover your loan if you can’t pay it back is a good thing, but this is an easy way for you to land in a debt cycle where you’re constantly renewing your loan or taking out more loans to pay for the first one.
  • Upfront fees or payments. Don’t borrow from a lender that requires you to pay an upfront fee. This is often a scam. Application and administrative fees are usually deducted from your loan before being given to you, and not requested before you receive your loan.
  • The lender approached you. If you’re getting flooded with texts and marketing calls asking you if you want to take out a loan – run. These could be a scam. Legitimate lenders will, at most, send you a letter or two in the mail. Anything more persistent should raise a red flag.
  • Non-traditional payments. Lenders either require you to leave a postdated cheque or make payments directly from your bank account. If a lender is asking you to pay in gift cards, cash or another untraceable method, you might be dealing with a scam.

Installment loans vs auto title loans: What are the requirements?

Government-issued ID, regular source of incomeGovernment-issued ID, title for vehicle and proof of insurance

When you take out an installment loan, you’ll need to present a valid government-issued ID and bring proof of your income. Most reputable lenders will also check your credit score. While you can get an installment loan from a lender that doesn’t check your credit score, this will likely be a much more expensive and risky option.

With an auto title loan, a lender will rarely check your credit score, and you usually don’t have to provide much proof that you can repay the loan. The most important requirements are that you own your vehicle outright and you have your ID and insurance papers with you.

Which option should you pick?

Both installment and auto title loans can get you cash quickly, but both can be risky in their own ways.

The auto title loan industry has a particularly bad reputation since it often targets individuals who don’t have the ability to repay their loans, which means their vehicle may be repossessed.

Installment loans can be a mixed bag, having both good and bad outcomes. Reputable lenders are out there, but in recent years, installment loans have been widely extended without lenders doing credit checks. As a result, they’ve trapped many borrowers in long-term cycles of debt, which is why they’re often associated with payday and auto title loans.

One of the biggest problems with auto title and installment loans is they can be extremely expensive. This often leads to miscalculating your ability to repay the loan and potentially getting into deeper financial trouble. If you urgently need cash, consider alternative options before settling on an auto title or installment loan.

There may be better financing options for you

Short term loans can be good in an emergency, but with their excruciatingly high fees and quick repayment terms, they may not fit your financial needs. If you’re looking for something more affordable and long-term, you may qualify for a personal loan to help you through a tough financial situation.

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