Understanding the differences between these two options may give you the tools you need to determine which financial resource is most appropriate for your current circumstances. Title loans and personal loans differ primarily in their types. The first option is secured, whereas the second is usually unsecured.

When financing is secured, it means that the borrower will be required to pledge an asset in order to guarantee the funding. Regarding title loans, this asset is a vehicle, and in most cases, it can be a car, truck, or SUV. Since the applicant will use their car’s title as collateral in order to secure the funding, a title lender will place a lien on the car’s title after the money is funded.


With a personal loan, no asset is required to secure the funding, and this type of financing option can be acquired from banks, credit unions, and online lenders.

Regardless of which option you decide to apply for, you must meet the necessary requirements and provide the proper documentation to obtain approval. Keep reading to learn more about title loans vs. personal loans!

What are the Advantages of Title Loans and Personal Loans?

Both options have key features that can potentially benefit your experience as a borrower. Take a look at some of the advantages that are associated with the first option:

  • Bad Credit Isn’t Always an Issue: Although a bad credit score does not happen overnight, it can usually take anywhere from 6-12 months to repair your score and undo some of the damage.
    Bad credit scores typically happen because of late payments, high credit utilization, or even bankruptcy. When you have a bad credit score, it will be difficult for you to secure funding through certain financing options.Since they are backed by collateral, the inquiry process tends to be more flexible.
    For individuals with poor credit, this type of financing option can often be the most advantageous because title lenders cater to subprime borrowers who may not be able to qualify for traditional means of financing. A subprime borrower is an individual with a score that is typically lower than 600.
  • Keep Driving Your Car: Since car title loans are secured, a qualifying vehicle is required to obtain funding. But, as long as the applicant prioritizes their monthly payments and does not miss one, maintaining access to a vehicle can be possible throughout the duration of the repayment period!

Following that, let’s explore the advantages of personal loans:

  • Use Your Funds for a Variety of Financial Issues: One of the main advantages of this unsecured option is that it can be used to deal with many different types of financial emergencies. They can help you pay for unexpected expenses, home or car repairs, and medical bills or assist you with consolidating your debt!
  • No Collateral Required: As mentioned above, they are unsecured. If you do not have a qualifying vehicle that you can use as collateral to secure funding, then this type of financial resource may be an ideal route for you to take instead.

What are the Disadvantages Between These Funding Options?

There are certain disadvantages that are associated with these two options. For example, while personal loans can be an option to consider if you do not have a vehicle to secure funding with, they are difficult to obtain approval for if you do not have a strong credit score. Additionally, even if you are able to qualify for an unsecured personal loan with bad credit, your terms may be inferior because you are a subprime borrower, which means you will pay more in interest over the life of the lending option.

When you are borrowing against the value of a vehicle, one of the most important potential disadvantages you may encounter involves the collateral you must use to secure the money. Since a lien is placed on the collateral after the funds are disbursed, the title lender has a legal claim to your car throughout the entire repayment process.

If you miss payments and end up in default, the lender may decide to seize your vehicle and sell it at a car auction in order to pay off the remainder of your debt. This potential disadvantage can be avoided by prioritizing your title loan payments and reaching out to your lender or if you are struggling to keep up with the terms of your agreement!

Which Route Should I Take?


Ultimately, when thinking about applying for either option, you should weigh the pros and cons before you make your decision. Choose the option that makes the most sense for you and your current financial situation!  Be sure to research both options thoroughly and speak to your lender if you have any questions.

The decision is yours to make, but it is important to make an informed decision! Consider your budget, credit score, and long-term goals when deciding. Once you have chosen an option, take the time to review and understand the terms of your agreement before committing to something.

Additionally, if you have any questions about the terms and conditions in your contract, you need to discuss them with a qualified representative. This could include questions about the interest rate, repayment terms, or any fees associated with applying for funding.

If you are searching for extra money, you may want to also consider the reason why you are stuck in this current financial situation. Maybe your spending habits are out of control, or you simply do not have an emergency fund ready to handle a rainy day.

Half of Americans have less than $500 dollars in their savings account, so if you aren’t ready to handle an unexpected expense, you are not alone. Whichever option you choose to apply for, it is important to have long-term financial goals. Prioritize your monthly payments, but also make sure that you are saving more money and cutting back on unnecessary spending!