Installment loans vs. title loans: What’s the difference? | finder.com

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

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If you’re in a cash crunch, installment loans and 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. Title loans and installment loans offer different benefits and have unique downsides. Calculate the cost, the risk and compare your options to find the best solution to your budget problems.

OppLoans Installment Loans

OppLoans Installment Loans
  • Easy online application
  • Quick approval
  • Fast funding
  • Long repayment terms

OppLoans Installment Loans

Installment loans with competitive rates from a top-rated direct lender.

  • Minimum loan amount: $500
  • Maximum loan amount: $5,000
  • Turnaround time: 1 business day
  • Loan term: 9 to 36 months
  • Must have direct deposit and meet minimum income requirements.
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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, terms usually last longer than an auto title loan, ranging from a few months to a few years depending on the purpose of the loan.
  • Auto title loans use the title of your vehicle as collateral. 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 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 auto title and installment loans

Rates last updated October 16th, 2018
Unfortunately, none of the short term loan providers currently offer loans in your state. Learn more about short term loans in your state to find an alternative.
Name Product Product Description Max. Loan Amount Turnaround Time Requirements
OppLoans Installment Loans
Installment loans with competitive rates from a top-rated direct lender.
$5,000
1 business day
Must have direct deposit and meet minimum income requirements.
CashUSA Installment Loans
A connection service for quick cash loans up to $10,000.
$10,000
As early as 1 business day
Must have a monthly income of $1,000+ after taxes and valid checking account.
Jora Installment Loans
Installment loans with repayment terms up to 30 months, depending on your state.
$2,600
1–2 days
Must have an active checking account, regular source of income and email address.
Blue Trust Loans Installment Loans
Get an installment loan from an online tribal lender. Perks for returning borrowers.
$2,000
As soon as next business day
Must be at least 18 years old and have a verifiable source of income with direct deposit into your checking account.
CashNetUSA Loan
Apply for a short-term loan with an easy online application and dedicated customer service.
Varies by state
1 business day
You must be a US citizen or permanent resident, be at least 18 years old and have regular income and a bank account.
LendYou Short-term Loans
Apply online with this loan-connection company offering unrestricted short-term loans at high maximums — fast turnaround.
$15,000
1 business day
You must be a US citizen or permanent resident, age 18+ and have a regular income.
Slam Dunk Loans
Potentially get approved for a short-term loan through this lender-connection service, even with poor credit history.
$2,500
As soon as next business day
Must be employed, receive regular income, earn at least $800 a month, have a checking account, be 18+ yrs old and a US citizen.

Compare up to 4 providers

Rates last updated October 16th, 2018
Unfortunately, none of the short term loan providers currently offer loans in your state. Learn more about short term loans in your state to find an alternative.
Name Product Product Description Max. Loan Amount Turnaround Time Requirements
LoanMart Car Title Loans
A LoanMart auto title loan allows you to borrow money against your car, even if you have bad credit.
$50,000
1 business day
Must live in AL, AZ, IL, MO, NM, SC or UT. Must have verifiable income, car value of at least $1,500 and a vehicle that is paid-off or close to being paid-off.
Max Cash Title Loans
With a quick online application, Max Cash could help connect you with a lender, finding you options in minutes.
$50,000
As little as 1 business day
Must be a US citizen or permanent resident, 18 or older with a regular source of income.
AutoTitleLoans.com Car Title Loans
Quickly find a lender and potentially borrow up to $10,000 by using this auto title loan connection service.
$10,000
Varies by lender
Have a regular source of income, not be involved in any bankruptcy proceedings, be a US citizen or permanent residence, be at least 18 years old (varies by state).
Finova Financial Auto Equity Loans
Short-term loans secured by your car title. Repayments accepted through MoneyGram if you don't have a bank account.
$5,000
as little as one business day
Must live in AZ, CA, FL, NM, SC, TN or OR. Must own your car outright, have a valid car insurance policy and be a US citizen or permanent resident.
TitleMax Auto Title Loans
Auto title loans on cars and motorcycles to people in 16 states across the US.
$10,000
as little as 30 minutes
Must have a lien-free vehicle title, government-issued ID, and be age of majority in your state.

Compare up to 4 providers

Installment loans vs. title loans: How much can I borrow?

Installment loanTitle loan
Typically between $1,000 and $5,000Typically 25% to 50% of your car’s value

Installment loans can go for than $500 or up to $10,000, but you’ll generally find one somewhere in the $1,000 to $5,000 range.

Title loans are a bit different. Because your loan amount is based on the appraised value of your vehicle, what you can borrow will vary by your lender and your state. On average, you can typically borrow from $100 to $5,000.

Installment and title loans often come in similar amounts, but you risk losing your car if you default.

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

Installment loanTitle loan
Three months to three yearsUp to 30 days

Installment loan terms typically range from three months to three years, though the exact term you get will be based on your lender and your state of residence. This gives you multiple months to repay the loan, but a longer term also means you’ll pay more in interest.

Car title loans, on the other hand, are extremely short-term. Many lenders set the due date at 30 days, though 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 it could end up costing you more money than a title loan with a quick turnaround time.

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

Installment loanTitle loan
25% to 100% APR300% APR and up

Both installment and car title loans can be very expensive. A three-digit APR isn’t unheard of with either option, though installment loans can sometimes be slightly less costly. Be wary when applying for either, and make sure you can repay your loan on time.

You should also search for a lender that doesn’t have a prepayment penalty. This means you can pay your loan off early without being charged a fee. Less time on your loan term equals less spent on interest, which can reduce the overall cost of your loan.

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

Installment loanTitle loan
Varies by lenderVaries by lender

You’ll probably pay a fee as soon as you take out an installment or auto title loan. These may include origination, processing and insurance fees. Whichever loan you pick, fees can add up to a substantial percentage of the loan. For example, if you take out a $500 title loan, you could pay $125 in fees alone.

Understand how much you’ll pay in fees before taking out either type of loan. You may be surprised 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 debt trap. While this is commonplace, 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. 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.
  • 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 origination fees are usually deducted from your loan funds before being given to you, not requested before you receive your loan.
  • The lender approached you. If you’re getting flooded with texts and robo-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.
  • Nontraditional payments. Lenders either require you to leave a postdated check or allow an ACH transfer 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.

What you should know about predatory lenders

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

Installment loanTitle loan
Government-issued ID, regular source of incomeGovernment-issued ID, title for car and proof of insurance

When you take out an installment loan, you’ll need to present a valid ID and a source of income. Most reputable lenders will check your credit, though likely not through one of the big three credit bureaus. While you can get an installment loan from a lender that doesn’t check your credit, this will likely be a much more expensive option.

With a car title loan, a lender will rarely check your credit, and you usually don’t have to provide much proof that you can repay the loan. The most important requirements are a lien-free title for your car, a valid ID and proof of insurance.

Which option should I pick?

Both installment and auto title loans can get you cash in a pinch, but they can be risky.

The title loan industry has a particularly poor reputation because it often targets individuals who don’t have the ability to repay and because a title loan requires that you use your car as collateral. If you don’t repay the loan, you may have your car repossessed.

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

Alternatives to installment loans and title loans

Not sure if either is right for you? Consider these alternatives.

  • Payday alternative loans (PALs). Some federal credit unions offer PALs as an affordable short-term loan option. Here, rates are capped at 28%, you can borrow up to $1,000 and terms range from one to six months. But they not every credit union offers them, so they can be hard to find.
  • State assistance. Depending on where you live and your income, you might be eligible for financial assistance from your local government. Check out our article on payday loan alternatives for more details.
  • Friends and family. If you’re in a financial pinch and can’t qualify for a loan from a lender, your social circle might be willing to help out.
  • Payday loans. This short-term loan has the fast turnaround time of a title loan but doesn’t require collateral. Like installment and car title loans, these are extremely expensive and should treated as a last resort. You also can’t typically borrow more than $500, depending on your state.

Bottom line

Both auto title and installment loans can be extremely expensive and come with a fast turnaround time. And with a title loan, you could end up losing your car. But if you need money fast and don’t have other options they could help cover an emergency expense. To learn more about how short-term loans work, check out our guide.

Frequently asked questions

There may be better personal finance options for you

Short-term loans can be good in an emergency, but they may not fit your needs. You may qualify for a personal loan to help you through a rough financial situation.

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US Payday Loans Offers

Important Information*
Slam Dunk Loans

Potentially get approved for a short-term loan through this lender-connection service, even with poor credit history.

LendUp Payday Loans

LendUp offers $250 loans for first-time borrowers. Good credit is not required. Visit the site to see if available in your state.

Check into Cash Payday Loan

With 1,000 branches in 30 states, get $50 to $1,000 in days from this direct lender.

OppLoans Installment Loans

Installment loans with competitive rates from a top-rated direct lender.

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