Payday Loans vs Title Loans

Payday loans and title loans are two different types of borrowing methods, each with different terms, eligibility criteria and borrowing amounts. Both loans can help those in need of access to cash when facing unexpected emergencies, but which one is the best to opt for? At some point in life, you may find yourself temporarily…


Payday loans and title loans are two different types of borrowing methods, each with different terms, eligibility criteria and borrowing amounts. Both loans can help those in need of access to cash when facing unexpected emergencies, but which one is the best to opt for?

At some point in life, you may find yourself temporarily short of cash when needing to pay urgent bills. There’s a range of different ways you can borrow money for this, including payday loans and title loans. Both types of loans work in different ways, and one might be more appropriate for you than the other, depending on the borrower and their circumstances.


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What’s the Difference Between a Title Loan and a Payday Loan?

The main difference between these types of borrowing is that a title loan is secured, whereas a payday loan is unsecured. What this means is that title loans will use the title of a borrower’s car as collateral, whereas payday loans won’t have any collateral.




The amount of money you can borrow on a title loan will be based on the value of the borrower’s vehicle. Title loans will also typically come with lower interest rates in comparison to payday loans. However, with this borrowing method you also risk losing your vehicle if failing to keep up with repayments.

Below, we’ve created a table comparing the key features for title and payday loans:


Loan Type Secured or Unsecured Loan term Bad credit considered Valuable Asset Needed
Title Loan Secured Short term Yes Yes, vehicle
Payday Loan Unsecured Short term Yes No asset needed


Car title and payday loans should only be used after careful consideration. Borrowers should be confident that this is the best borrowing option for them, and be sure that they can afford the loan.



What Is a Title Loan?

Title loans are a type of secured loan that use a borrower’s vehicle as collateral. The amount of money you’ll be able to borrow with a title loan lender will depend on the value of your vehicle.

Title loans are short term loans. During the period of the loan, the lender will usually hold your car title until the loan is fully repaid. You’ll still be able to drive your vehicle throughout this term.

In a lot of cases the borrower will pay back the loan in a lump sum, however the precise repayment details will depend on the situation.


How Does a Title Loan Work?

Title loans work by using your vehicle as security on the loan. The value of your vehicle will also impact the amount you can borrow, and you’ll have to take it for an inspection to determine this value.




Typically, the submission process for a title loan is quick and simple. As well as taking your vehicle for inspection you’ll also have to fill in the necessary paperwork and ensure you meet the lender’s eligibility criteria. If everything checks out and you’re approved, the lender will then organise for the funds to be released.

Those with bad credit may be eligible for a title loan, as the loan is secured with your vehicle, meaning the lender gets security that the loan will be paid back, even if the borrower cannot keep up with repayments. In fact, the majority of title loans don’t even conduct a credit check on borrowers. This lack of credit check can speed up the process of title loan requests.


Are Title Loans Legal?

Title loans are only legal in certain states. If you’re planning on taking out a loan, whether it’s a title loan, payday loan, or any other type of borrowing, it’s important to firstly check this is legal in your state.

A good way to determine whether a lender is legal is to check that they have a state-issued license. This license should be visible, if online somewhere on the website, and if in a physical store somewhere on the storefront.


How Much Can I Borrow With a Title Loan?

With a title loan you can borrow between 25%-50% of the vehicle’s total value. As the amount you can borrow is determined by the worth of your car, the loans offered can range from as little as $100 to over $10,000.

When taking out a title loan, as with any loan, you should only request to borrow what you need, and what you can afford.


What Is a Payday Loan?

A payday loan is a type of lending many borrowers use to help them make it till their next payday. The average American gets paid monthly, which can be difficult for those experiencing a temporary shortfall of cash.




Perhaps you’ve faced an unexpected emergency and don’t have funds saved to cover the cost until you’re next paid. A payday loan can help you by lending the money you need in one lump sum, which you can repay (along with interest) in full once you’ve been paid again.


How Does a Payday Loan Work?

A payday loan works by lending eligible borrowers money for a short period of time. Repayments are paid in equal monthly installments, however some lenders may let you repay after just one month, while others offer borrowing periods of 3 months, 6 months or longer.

You can submit a payday loan request online. With Pheabs, our form takes less than 5 minutes to complete, after which you’ll receive an instant decision on the screen.

When filling out a loan submission request, you’ll need to provide a few personal details, including the following:

  • How much you want to borrow
  • How long you want to borrow for
  • Your name
  • Your age
  • Your employment
  • Your driver’s license number/state ID
  • Contact details (e.g. phone number and email address)
  • A valid checking account

You’ll also have to meet eligibility criteria to be in with a chance of being approved. Affordability checks are taken to help ensure that prospective borrowers can actually afford the amount they’re asking to borrow.

Payday loans can consider various different credit histories, meaning those with bad credit can still submit a loan request form. Unlike title loans, the majority of payday loans will have to carry out a credit check as part of reviewing the prospective borrower’s submission.


How Much Can I Borrow With a Payday Loan?

The amount of money you could borrow with a payday loan varies depending on your eligibility as well as the state you’re in. 32 states that allow payday lending have a cap on the maximum loan amount you’re allowed to borrow. Some of the highest capped amounts come in at $1,000, while some of the lowest caps are priced at $300.

Depending on the state you’re in, you’ll typically find the average amount you can borrow with a payday loan to range from around $50 – $1,000.


Title Loan vs Payday Loan: Which Should I Choose?

Title loans and payday loans are best suited to different types of borrowers. For example, a title loan could work well for someone who has a car to use as security and wants to borrow a larger amount than a payday loan would necessarily allow (borrowers able to get loans of $10,000 or more depending on the value of their vehicle).

However, for those who want quick and easy access to a short-term loan without having to put a valuable asset at risk of repossession, a payday loan may be more suitable.

Ultimately, the best way to borrow will depend on your circumstances and individual needs. When looking to find the best loan for you, it’s good to explore a variety of different options, helping you make a more informed decision on how and where to borrow.

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