Loans in South Africa – Title Loan vs Payday Loan: Which Is Better For You?

Jun 13, 2019

Have you ever experienced that feeling of utter helplessness while surrounded by stacks of bills and the knowledge that you may or may not be able to stay afloat throughout the month? Throw in the occasional and unexpected emergencies, such as injuries, household appliance breakdown, or car accidents, and you’ll quickly find your cash flowing down the gutter if you don’t have a back-up plan.

When such a financial storm hits, it can be tricky to choose what type of short-term loan you need to survive. In that regard, title and payday loans come in handy as both act as a crutch to help you through a crisis. But how do you know which one suits your needs the most? Here are several key features about each that just may help you out:

What are their common features?

Both loans are relatively easy to qualify for and typically don’t require rigorous credit checks, making it a relatively smooth process. It is, however, a double-edged sword. On the one hand, it is a fast and convenient way of getting extra cash without doing any damage to your credit rating, so long as you are paying on time.

On the other hand, delayed payments can increase interest rates as a penalty. It can be a saving grace when used wisely as it offers a quick yet temporary solution in times of an urgent crisis. However, a single slip can lead you to a more significant squeeze. As such, choosing the right plan for you is essential as even the slightest difference can leave a substantial impact on your finances.

What are Payday Loans and its benefits?

Also known as “salary loans” or “cash advance loans,” this is a short-term loan that you get by writing a post-dated personal check in-store or giving your lender access to your bank account, all of which are dated for your next payday. This option is for people who are unable to secure a long-term credit and need a quick fix on their financial situation.

The good thing about this is that lenders have no collateral to seize if you are unable to pay back the loan, which means you won’t risk losing property like your vehicle. Another benefit is that it puts no limit on the amount you need, allowing you to issue a check with whatever number suiting your situation.

Regardless, failing to pay on time can be a stressful ordeal as lenders are known to use aggressive tactics to collect due payment, such as constant phone calls and uncalled-for threats on legal matters. Another downside is the fact that these lenders are typically hard to contact as their offices are often located at impossible-to-find places.

What are Title Loans and its benefits?

This method allows you to borrow money by using the title to your car as collateral. The maximum amount of the loan is based on a percentage of the estimated car value, though there is also an option to obtain amounts that are lower. Lenders offer to settle the debt all at once, but they also give the advantage of paying it through multiple instalments over some time. This is ideal for those who need to sell their car immediately in exchange for a low cost. It also showcases lower interest rates between 60% to 130%.

Which credit product suits you better?

Both loans possess redeeming features that help fight off financial troubles when faced with unexpected expenses. However, the two pose different risks that all end up the same one way or another: you spiral out of your control with even more debt upon failure to pay on time. For this reason, it’s best to choose these options only when the situation demands it. Desperate times may call for drastic measures, but taking the time to weigh your options and analyze which one suits you best is a step that you should never skip.

If you’re looking for a payday loan in South Africa, get in touch with us today! We’re happy to help you with your situation.