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Credit cards have become an integral aspect of the lives of many people. So much so, Americans now owe more than one trillion dollars in credit card debt. Title loans, on the other hand, provide a way to borrow against your vehicle and pay off the debt quickly. Unlike credit cards, which often entail ongoing balances, title loans are typically short-term in nature. This can help you resolve a financial need without the temptation to use more credit. Before choosing either option though, it’s essential to consider the nature of credit cards vs title loans to determine which is right for you.
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Understanding Credit Cards
A credit card provides a revolving line of credit that you can use to borrow to pay for goods and services. This means you can charge up to your approved limit, pay a portion or all of the balance by the due date, and use it again for additional purchases.
When an issuer approves your application for a credit card, it sets a credit limit – the maximum you are allowed to borrow on the card at any one time. Each time you make a purchase, the card issuer pays the merchant on your behalf, and adds the amount of the transaction to your account balance. This reduces your available credit.
Each billing cycle, the issuer sends you a statement showing your total balance, the minimum payment due and the due date. Interest charges are added to the balance if you do not pay it in full by the due date. Card issuers may also impose annual fees, late fees or cash advance fees. Some credit cards feature rewards programs and protective benefits to make them more enticing.
How Credit Card interest and Fees Work
Interest rates and fees tend to vary by the type of card and your credit score. Some cards charge no annual fees, while premium rewards cards may impose fees of $600 to $900 each year. Late fees of $30 to $40 are common if you miss the due date. Cash advances usually cost between 2% to 3% of the advanced amount, and can also come with a higher APR than balances resulting from regular purchases.
Credit scores determine credit card eligibility, with higher scores typically unlocking lower interest rates, higher credit limits and premium rewards. Lenders typically use VantageScore or FICO models to make these determinations. Scores under 580 often result in application denials. Scores of 670+ usually open standard options, while scores of 740+ commonly secure top-tier card approvals and perks.
Understanding Title Loans
An auto equity title loan is a secured loan that allows you to use your vehicle, registered in your name, as collateral to obtain cash quickly. To qualify, your vehicle must have enough value to secure the loan, and you’ll need to provide proof of income to prove your ability to make timely payments.1 Most lenders also require applicants to be at least 18 years old and reside in the state in which the loan is issued.1
Depending on the lender’s requirements and state regulations, you may be eligible to borrow up to 50% of your car’s equity. This is determined by the vehicle’s make, model, year, mileage, overall condition and any outstanding amounts owed on the car.1 With loans serviced by LoanMart, there’s no need for an in-person inspection. Instead, you’ll be asked to submit photos of your car during the online application process, saving you time and money.
Loan amounts tend to be flexible, so you can borrow as much or as little as you need – within your approved loan amount range – to suit your needs. Because vehicle-secured loans are designed for speed, you can potentially be approved in less than an hour and have your money by the next day – or sooner.1 3 After funding, the lender places a lien on your vehicle’s title and removes it once you repay the loan.
Key Differences Between Credit Cards and Title Loans
Credit cards and title loans are designed to serve different borrowing needs. For example, credit cards offer revolving unsecured credit, while auto title loans provide short-term secured cash against your vehicle. This makes credit cards more useful for ongoing purchases, while title loans may be better for dealing with sudden emergencies.
Here are some other differences to consider.
- Credit cards provide a reusable line of credit, allowing repeated borrowing and repayment without reapplying. Meanwhile, title loans provide a lump sum in exchange for a lien against your vehicle for a typical term ranging from 30 days to several months.
- Credit card interest rates average around 24% annually, which can increase if balances are carried over. There are also fees for cash advances or late payments. Title loans interest rates vary greatly depending on the lender you choose and the amount you borrow. They may frequently range from 100% up to 300%, and sometime come with origination fees and other fees.
- Credit cards offer minimum monthly payments, which are designed to extend the repayment period in order to glean more interest payments. Title loans usually require repayment in full, over a fixed term, with a pre-defined payment schedule.
- Credit card issuers usually require applicants to have strong credit histories. Car collateral lending is usually much more lenient in this regard. Poor credit is not necessarily a barrier to getting a LoanMart-serviced title loan.
Advantages of Choosing Title Loans
Even if you’re eligible for a credit card, getting one can take much longer than getting a title loan, which can be approved in a day, if not sooner.1 3 That can be a key factor when you need funds quickly. You may also have access to a larger amount of cash with a car equity loan often exceeding credit card limits – assuming the amount you need is within the parameters set by the lender. Title loans can also help you avoid the pitfalls of revolving debt. Given such comparative benefits, it’s no wonder that more people are taking out auto equity loans. Usage rose from 3.7% of consumers in 2023 to 5.2% in 2024 according to a recent survey by the Consumer Financial Protection Bureau.
Considerations Before Choosing Between Credit Cards and Title Loans
While credit cards can offer greater flexibility, title loans can frequently provide faster access to cash with less stringent credit requirements. Key considerations when choosing between the two include interest rates, repayment terms, eligibility requirements and risks. You should also assess your financial needs and their urgency to help you decide.
Why Choose a Title Loan Serviced by LoanMart?
There are many benefits to opting for a title loan serviced by LoanMart. Interest rates are competitive compared to similar types of lending. You can pay off your loan early without penalty and you don’t need good credit or a bank account to get one.1 You’ll also find transparent terms, along with quality customer service and support. What’s more, borrowers who manage their loans responsibly can potentially qualify for additional funding.1
The online application process is also easy – it can take less than five minutes to apply, and you can be approved in under an hour.1 3 If you are approved, your cash can be available as fast as same-day.3
Here’s what you need to do to apply.
- Complete a brief online application, or call 855-422-7412 to apply with a loan officer
- Submit the required documents (a government-issued photo ID, proof of income and residence, and photos of your vehicle)
- In some cases you may also need to submit a DMV form granting approval to place the lien.
- Review and sign your loan agreement. Once signed and your title has been mailed-in, your funds will be released!
When comparing credit cards vs title loans, it’s important to consider repayment terms, interest rates, qualification criteria and potential risks. It’s also essential to evaluate your financial needs and the urgency of your situation. With title loans serviced by LoanMart, you’ll get competitive rates, fast funding, transparent terms, excellent customer service, an easy application process and the possibility of additional funding. Apply online today to see how a title loan can benefit you!1
