Title Loans and Installment Loans. What’s the Difference?
February 10, 2020 | Peyton Sawyer
What’s the difference between title loans and installment loans? While both types of loans provide a borrower with the funds they need, their requirements, loan amounts, and effect on an individual’s credit are quite different. Knowing these differences and how they impact you, as a borrower, is important. Having the knowledge to determine the funding option that will work best for you is a key factor in the decision-making process. Having the information you need will require a look at both loan types, so first, let’s define each and compare.
What is a Title Loan?
A title loan is a secured loan. Secured means that the borrower is asked to use an asset as collateral. For a title loan, the borrower’s asset, specifically their vehicle, is used as collateral in exchange for a loan amount. This amount is determined by the value and condition of the vehicle being used to secure the loan. More commonly this type of loan is referred to as a car title loan, but you can use a car, truck, SUV, or motorcycle as collateral, as long as you hold a lien-free title on that vehicle. Like any secured loan, you run the risk of losing your asset for non-payment. If you are late on payments or default completely on your title loan, the lender has the right to repossess the vehicle used as collateral to satisfy your debt. You can learn more about title loans in this article.
Title Loan Requirements
At Wisconsin Auto Title Loans, Inc., you can receive title loan approval in no time at all with the few requirements that have been listed below.
- A driver’s license or state-issued ID
- A lien-free title to your vehicle
- Vehicle inspection to determine its value
Obtaining a car title loan at Wisconsin Auto Title Loans, Inc. does not require proof of income or a look into your credit history. By providing the simple requirements listed above, you can receive the cash you need, the same day you need it, and still drive your vehicle while you make payments.
What is an Installment Loan?
An installment loan is a loan where the borrower takes out a specific amount of money, to be repaid with a scheduled amount of payments over a period of time. These payments will include the principal payment, as well as an agreed-upon interest rate. Typically, the interest rate on an installment loan is lower than the interest rate charged on credit cards, which can make them useful in managing a sum too large to pay off within a short time frame.
Installment Loan RequirementsThe requirements requested for an installment loan at Wisconsin Auto Title Loans, Inc. are listed below. Take a look to see if you can provide what is needed for approval.
- A driver’s license or state-issued ID
- An active checking account in your name
- Proof of income (most recent pay stub)
Applying for an installment loan will usually require a look into your credit, but that does not mean you will be denied if you have a less than a satisfactory credit score. At Wisconsin Auto Title Loans, Inc., your credit score will be considered, but not used as the deciding factor.
How are Installment Loans and Title Loans Different?
There are a few characteristics that make title loans and installment loans different besides their requirements. As mentioned above, a title loan is a secured loan that requires an asset to secure the loan amount, whereas an installment loan is not unsecured and does not require collateral. The very nature of the two differs from one another, as do the amounts that can be borrowed, the repayment schedule, and the effects on one’s credit.
Title Loans vs Installment Loans: How Much Can I Borrow and For How Long?
Installment loans are usually paid off over the course of several months, whereas title loans are usually expected to be paid off in just a few months. The loan amount also differs, which can make a big difference when deciding what loan best suits your needs. With Wisconsin Auto Title Loans, Inc., you are able to borrow up to $1,250 with an installment loan, and up to $15,000 with a title loan. These amounts will differ from one lender to the next, so it’s important to do your research and compare not only loan amounts but payment plans as well.
How Does A Title Loan Differ From An Installment Loan When It Comes to Credit?
Unlike installment loans, title loans do not require a credit check, nor do they typically report to credit agencies like TransUnion and Equifax. Because title loans are secured loans, they rely on the exchange of your vehicle to satisfy the loan if defaulting should occur. Once the loan has been satisfied, you no longer have an outstanding debt that requires reporting. To those who have a poor credit rating and cannot use their credit for loan approval, a title loan may be even more appealing.
How Does an Installment Loan Affect My Credit?
Most types of loans, including installment loans, are reported by the lender to different credit agencies. These agencies keep a record of what you have borrowed and how successfully you have paid your loans back. After they have taken that into consideration, they calculate that into a score ranging between 300 and 850. This is your credit score. And as you know, the higher your score is, the better. This score helps future lenders determine if you are a responsible borrower before they approve or deny your request.
Paying off an installment loan on time will help you to create a profile that shows you as a responsible borrower. Doing so will help to build your credit and allows you to open doors to other lenders and larger sums.
The only way an installment loan can affect your credit score in a negative way is if you fail to make your payments on time or if you default on the loan completely.