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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.
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.
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.
| 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) |
| Title loan | Payday loan |
|---|---|
| Typically $100 to $5,500 | Typically $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.
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.
| Title loan | Payday loan |
|---|---|
| Typically due in 3 months to 3 years | Typically 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.
| Title loan | Payday loan |
|---|---|
| Up to 60% APR | Typically 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.
| Title loan | Payday 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.
| Title loan | Payday 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.
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.
Read this PrestoCash review to help you decide whether you should apply.
You can get a payday loan with a low income, but watch out for high interest rates.
Some payday lenders accept AISH as a valid source of income. Find out where you can get approved for AISH payday loans.
Compare the features of Money Mart vs Cash Money, two well-known alternative lenders in Canada.
Browse your options for in-store or online payday loans in Hamilton.
Xcash Money Solutions provides different types of loans to Ontario residents, including payday loans, personal loans and car title loans.
You can take out an installment loan or payday loan in Alberta using your child tax benefit.
Compare lenders that offer payday loans and installment loans like Money Mart.
Browse payday lenders in Canada that offer loans like Loan Express.
Loan Express offers payday loans of up to $1,500 through a fast, paperless process.
