Often, people in Ohio (just like many Americans) need quick cash to cover unexpected expenses that occur during emergencies, such as medical bills, home renovation, car repair, and the like. The good news is the economy is doing well and manufacturing jobs are coming back to Ohio, reducing the need for loans. However, if you do need to take out a loan for any reason, there are many types of loans on the market and the process of obtaining a loan can be rather confusing for a first-timer.
In this article, we’re going to examine the similarities and differences between payday and title loans so you can decide which one works best for your situation.
How payday loans work
Payday loans are convenient in the sense that they can be applied for through the internet. Usually, you need a post-dated personal check for the sum you’re going to borrow in addition to an added fee to be paid to the lender. You are given the loan, then after a set period of roughly 14 days or so, you need to pay the loan plus the finance fee in cash, or let them deposit the personal check. If you do not pay the loan on time, you will be charged with further fees. However, one major downside of payday loans is their high-interest rates. The Consumer Financial Protection Bureau states this figure is around 400% APR, which can be very daunting for borrowers to pay off in time. Eventually, not being able to pay off your payday loan could lead to a cycle of endless financial problems.
How title loans work
Title loans are usually based on your ownership papers to your home or vehicle, where a lender offers you a loan based on a percentage of its value. Your property then functions as collateral until the debt is paid back in full. Unlike payday loans, title loans in the Buckeye State have lower interest rates and less late repayment fees. For residents who are more inclined to minimum monthly payments, title loans in areas such as Akron, Ohio also offer a repayment option of up to three years, which means borrowers can stretch their funds according to their capacity to pay. This is ideal for those who need money quickly, but don’t have a short-term ability to pay it all back.
Recently, legislation has been passed in order to “crackdown on sky-high interest rates and sneaky fees” according to an article on payday loans by Cincinnati.com. These will be replaced by loans with shorter terms, longer repayment periods, and a cap on interest fees and borrowing. Supposedly, these changes are meant to save Ohio locals $75 million a year. Also, borrowers can now change their minds if they took out a loan on impulse, with a three-day grace period where a borrower can cancel the loan and give back the money without penalty. Because of this, these new restrictions should make it easier to take out and repay a loan in case you need it.