The key to obtaining the perfect credit resource is to know and understand all loan options available in order to make an informed and financially sound decision. Most individuals have a general knowledge of personal loans, although very few completely understand title pawns. To make a smart choice, examine the differences between the two to learn which option is best for specific types of purchases.
Title Pawns Use Collateral
Put simply, title pawns are based upon the idea of collateral. To secure funding, a car title, boat title, etc. can be put on file with the lending company in case the borrowed amount is not paid back completely and on time. This lowers the level of risk the funding company or bank has to take on, making the available loan easier to obtain by a borrower.
The amount funded is dependent upon the worth of the piece of personal property offered as collateral. For example, if your vehicle can be sold easily at $10,000, this may be the maximum amount offered by the lending company (not including interest). When the amount is paid off completely the lender will return the collateral item’s ownership paperwork back to the borrower.
Depending on the state the borrower resides in, there are often limitations set on the amount of funding a lender can offer on a title pawn. It is often best to speak to a professional finance company regarding your state laws and regulations regarding title pawns for financing.
Personal Loans Use Credit Strength
Personal loans are often structured on the idea of credit strength. Those who can prove worthiness of credit by either credit score and/or past loan payment history can be offered funding. The amount that can be lent to an individual is dependent on credit history, credit rating and if previous credits were paid off in full and on time.
Interest also comes into play when taking on personal loans. Depending on the current interest rates and an individual’s history, a percentage will need to be paid along with the principal (balance) of the borrowed sum.
Understand Personal Loans Verses Title Pawns
The primary difference to note between these two options is that of collateral verses no collateral and higher risk for the lender verses lower risk for the lender. However, when considering title pawns, it is important to recognize that the interest accumulated will require a much larger payoff on the borrowed sum over time. Personal loans offer the ability for an individual to pay the interest off quickly if they choose, alongside the principal payment. In short, personal loans can offer a lesser amount due at the close, often proving to be a smarter financial choice.
When considering any type of loan it is essential to choose a financial company that can assist you in finding the option that best reflects your current financial needs while anticipating your future circumstances. By doing research prior to borrowing any amount, you’ll be able to take advantage of the most affordable and worthy lending options available.