As compared to alternate lenders, banks offer interest rates that are lower. However, many of the banks also have strict requirements in lending that make it extremely difficult for some of the borrowers. In order to counter this issue, a market has been created for alternative loans. Since the borrowers are obviously looking to get money from elsewhere. These alternative loans are inclusive of payday loans, personal loans, and car title loans. Here is a comparison of these loans:
When shopping for a loan, you might want to ask for it from a family member or a friend. And if you have someone you can trust completely in this aspect, then why not go for it! However, this might still be risky for a number of reasons. For starters, you might just be declined the loan in the first place. If you do get the loan, then you might fail to meet the agreement that had been reached between both the parties initially. And you do not want your friendship to become strained over this, right? While it is highly beneficial to carry out business with close friends and family, it can also have damaging effects if the execution is not proper.
Car title loans and payday loans are highly practical to get since they just require you to submit a few documents.
2. Interest rates
If you borrow from your family or friends, then they will, in most of the cases, charge you with lower interest rates as compared to those charged on alternative loans. However, this might not be such a good approach for your relationship in the long run.
The payday loans interest rates are extremely high, however, the rates on the pawn loans are comparatively lower. Car title loans lie somewhere in the middle. You should check these rates out by shopping around to get a better idea of what all is happening.
The interest rate fluctuations these days can be pretty drastic. You always need to keep an eye on the news in case there is a sudden increase, or a decrease in the interest rates. Either way, its something that can greatly affect the monthly installments you are paying every month.
All loan types will carry risks. If you ask for a loan from a friend or a family member, then you might end up damaging the entire relationship. This leads to a further negative impact if you are not able to repay the loan in a timely manner.
Payday loans can take you to court and if the judgment goes in the lender’s favor. Then you might have to end up with your wages garnished or some other financial issue. Pawn loans, on the other hand, involve a total loss risk of relevant assets. Car title loans involve the borrower’s vehicle to be at risk and it can be repossessed if the loans do not get repaid.
It is wise to carry out a comprehensive analysis on all these alternative loans to get a better idea of which loan you should go for. With this, you will get a better idea on which type of alternative loan matches your requirements in the best manner possible.