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Car title loans vs payday loans: How do they compare?

Not sure whether to get a title loan or payday loan? We've got you covered.

When a financial crisis hits, it can be hard to determine what type of short-term loan you need to start picking up the pieces. Car title loans (or simply known as “title loans”) and payday loans have a lot of similarities, but the differences can make choosing one over the other difficult. You’ll need to compare a number of features to find the best option for you.

⚠️ Warning: Be cautious with payday loans
Payday loans are expensive. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). Consider alternatives instead of a payday loan:
  • Local resources. Government programs and nonprofits offer free financial services and help with food, utilities and rent.
  • Debt relief companies. There are services to help you reduce your debt payments.
  • Payment extensions. Talk with bill providers about longer payment plans or due-date extensions.
  • Side jobs. Sell unwanted items online, sign up for food delivery and more.

What’s the difference?

Both types of loans are fairly easy to qualify for and typically don’t require stringent credit checks. However, they’re known for being costly forms of credit. If you aren’t able to repay your loan by the due date, your lender will start assessing extra fees that can quickly drive up the cost of your loan, no matter which you’ve opted for.

  • Title loans. When you take out a title loan, you borrow money by using the title to your car as collateral. You keep using your car but if you don’t make your payments you could lose it. This type of loan is usually due within the range of three months to three years.
  • Payday loans. A payday loan is a short-term loan that is paid back to the lender when you receive your paycheque. The due date is usually set for the next time you’re paid, typically two weeks.

Browse your payday loan options

Finder does not currently have any auto title loan providers available for comparison. Instead, you might like to compare payday loan providers in the table below. Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.

1 - 4 of 4
Name Product Loan Amount Loan Term Interest Rate Turnaround Time Serviced Provinces Offer
Money Mart Payday Loan
$120 - $1,500
1 - 62 days
Varies by province
As little as 1 hour after getting approved
AB, BC, MB, NS, ON, SK
To be eligible, you’ll need to be at least 18 years of age with a steady source of income and a chequing account. No credit check required.
Cash Money Payday Loan
$100 - $1,500
5 - 40 days
Varies by province
As little as 15 minutes with INTERAC e-Transfer
BC, NL, NS, ON, SK
Apply for your first $300 payday loan at a $20 cost (excludes SK applicants).
Have your banking details ready to get a loan in 2 hours. You'll need to be 18 years of age or older and have a net income of at least $1,000/month. Residents of MB and NB must apply in-store for a loan.
iCASH Payday Loan
$100 - $1,500
7 - 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer
AB, BC, MB, NB, NS, ON, PEI
Get up to 20% in cash back once your payday loan is fully repaid. Conditions apply.
To be eligible, you'll need to be at least 19 years of age and have a net income of at least $800/month deposited into your bank account.
GoDay Payday Loan
$100 - $1,500
Up to 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer
AB, BC, MB, NB, NS, ON, PEI, SK
To apply, you'll need to be a Canadian resident over the age of 18 with a valid email address, phone number and an open bank account with a Canadian bank or credit union.
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Maximum borrowing costs per province
Always refer to your contract for exact repayment amounts and costs as they may vary from our results.
Province Maximum allowable cost of borrowing
Alberta, British Columbia, New Brunswick, Ontario & Prince Edward Island $15 per $100 borrowed
Manitoba & Saskatchewan $17 per $100 borrowed
Nova Scotia $19 per $100 borrowed
Newfoundland and Labrador $21 per $100 borrowed
Northwest Territories, Nunavut & the Yukon $60 per $100 borrowed
Quebec Limit of 35% annual interest rate (AIR)

How much can I borrow?

Title loanPayday loan
Typically $100 to $5,500Typically $100 to $1,500

On average, you can borrow between $100 to $5,500 through a title loan. The exact amount you’ll receive depends on the appraised value of your car.

With a payday loan, you can usually borrow between $100 and $1,500. Many provinces have borrowing limits that protect consumers so make sure you check the payday lending rules where you live.

You may be able to borrow more with a title loan, but it comes with the risk of losing your car if you default. Since payday loans don’t require collateral, you won’t lose any personal property if you fail to repay.

Compare auto title loans

1 - 1 of 1
Name Product Loan Interest Rate Max. Loan Amount Loan Term Requirements
Loans Canada Vehicle Title Loan
Loans Canada Vehicle Title Loan
0% to 29.99%
$35,000
3 - 96 months
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 300
A broker with the largest lender network in Canada. Fill out one application and get matched for free with lenders. Bad credit, CERB and EI borrowers are considered.
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What does it mean to default on a loan?

If you’re unable to repay your loan, a lender may put your loan into default and begin the collections process. For secured loans, this means the property you used as collateral can be repossessed. For unsecured loans, your credit will suffer and lenders may take legal actions against you to recoup lost money. Read more about what happens when you default on a loan.

What are the repayment terms?

Title loanPayday loan
Typically due in 3 months to 3 yearsTypically due by your next payday

Both title and payday loans need to be repaid within a short period of time.

Since you’ll need to repay these loans quickly, it’s best to use them only if you’re sure you’ll have enough money to repay them by the due date. Otherwise, you risk default and excess fees that can increase the cost of your loan exponentially.

What are the interest rates?

Title loanPayday loan
Up to 60% APRTypically 400% APR and up

There’s no escaping the fact that both title and payday loans are expensive. A title loan will likely cost you up to an average APR of 60%. Fortunately, lenders cannot legally charge more than 60% interest annually, which includes all fees, costs and interest that you’ll pay to get the loan.

With a payday loan, you’ll usually be charged $15 to $25 for every $100 you borrow. This finance charge serves as the interest you’ll pay on your loan. Since the window of a payday loan is around two weeks, the APR works out to about 400% or more. For example, if you take out a payday loan for $500, you might pay $150 in interest — nearly a third of your loan. Payday lending regulations vary by province so make sure you look up the rules where you live.

Both title and payday loans come with high interest rates. This is why it’s crucial to shop around for a good deal and consider your alternatives before committing to any type of short-term loan.

How much are the fees?

Title loanPayday loan
Varies by lender$15 to $25 per $100 borrowed

Fees for title loans will vary based on the lender. These may include vehicle evaluation, title search and administration fees. Some lenders may even install a GPS device or a car immobilizer for security and charge you fees for their installation. Before agreeing to anything, be sure that you understand the loan terms and any fees you’ll need to pay. Some title loan lenders like to tack on fees for optional items such as roadside assistance, so go over your contract carefully to be sure you’re getting a fair deal.

For a payday loan, you’ll usually pay $15 to $25 for every $100 you borrow. If you can’t pay off your loan when it’s due, you may need to roll the amount you borrowed into a new loan. At that point, you’ll likely pay additional fees. This can increase the amount you have to pay by hundreds of dollars. Because of this, some provinces have made rolling over payday loans illegal.

Fees for both loans can be high, although title loans tend to come with more aggressive fees. Check around to find a loan that has low fees, and always make sure your lender is obeying the laws of your state.

What are the application requirements?

Title loanPayday loan
Proof of ownership
Proof of permanent residency
Proof of insurance
Driver’s licence
Bank statement
Car inspection
Permanent address
Bank account details
Proof of regular income

Title and payday loans are relatively easy to qualify for because lenders rarely run credit checks. You’ll just need to provide the standard requirements above.

Which option should I pick?

While title and payday loans can help you quickly get cash, they can be quite expensive, especially when lenders sneak in hidden fees and terms. Your choice depends on the amount of risk you’re willing to take on and how much money you need.

A title loan can be better for people who need more money and are sure they can repay their loan by the due date. However, if you only need a small amount and don’t want to use your vehicle as collateral, a payday loan may be a better option. Since the costs are about equal, weigh your options carefully.

You can also consider some payday loan alternatives if you’re not ready to take out a loan.

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