Payday lenders, title lenders and pawnshops all market their services to borrowers who lack other options for fast cash. Of the three, pawnshop loans are the least toxic.
- Car title loans: Not to be confused with a loan used to buy or refinance a used or new vehicle, an auto title loan is when borrowers turn over their car title in exchange for quick cash. Though most of these loans don’t require a credit check, they also come with hefty interest rates and fees, not to mention the risk of losing your vehicle if you fail to repay. More Info
- Payday loans: Yes, you could get cash quick with one of these small-dollar loans, but they carry an average APR of 391%. The idea is that cash-strapped borrowers receive money with the promise of repaying it on their next payday. They typically leave a postdated check for the total loan amount and fee with authorization to access the funds in their bank or prepaid account. More Info
- Pawnshop loans: How pawnshop loans work - To get a pawn loan, you go to a pawnshop with something you own that you’re willing to leave there as collateral. The staff assesses the item’s value, condition and resale potential, then decides whether to offer a loan. Interest rates on pawnshop loans vary and typically are presented as fees, but it’s more useful to compare loans in terms of annual percentage rate. Pawnshop loans can run to more than 200% APR. Payday loans and car title loans can easily top 400% APR.
To be clear, we do not recommend pawnshop loans. But if you have no other options and need cash immediately, a pawnshop loan is better than an auto title loan or payday loan.