When you need to borrow money, you have more than one place to look.
Traditional banks offer personal loans and other forms of financing, while vehicle owners may also come across title loans when searching for short-term financial help.
But these aren't the same type of loan.
A traditional bank loan may rely heavily on factors such as your credit history, income, existing debts, and the amount you want to borrow. A title loan is a secured loan that uses a qualifying lien-free vehicle title as collateral.
So, what's the difference between the two?
In this guide, we'll explain what a traditional loan is, what a title loan is, how title loans work, and five of the biggest differences to consider before borrowing.
What Is a Title Loan?
Atitle loan is a secured loan that uses the title to qualifying personal property, usually a vehicle, as collateral.
Missouri's Division of Finance explains that Missouri title loans are secured by titled personal property, primarily automobile titles, and are governed by specific state title lending laws and consumer protections.
With Missouri Title Loans, Inc., qualified borrowers may receive up to $15,000* based partly on the value of their vehicle.
To qualify for this product, the vehicle needs to be fully paid off and the title must be free of liens.
The current core required items are:
- Driver's license or state-issued photo ID
- Lien-free vehicle title in your name
- Your vehicle for inspection
How Do Title Loans Work?
Here's the basic idea.
You own a qualifying vehicle outright.
You use the lien-free vehicle title to secure the loan.
A representative evaluates the vehicle to determine its value, and that evaluation helps determine the potential loan amount.
Missouri Title Loans, Inc. currently evaluates factors such as:
- Age
- Make
- Model
- Condition
If you're approved, you receive the loan and repay it according to the agreement.
You can continue driving the vehicle while making payments, but the title remains connected to the loan as collateral.
That last part is important.
Missouri law requires title-loan agreements to clearly disclose that failure to repay may result in the loss of the vehicle or other titled property used as collateral.
What Is a Traditional Loan?
The phrase “traditional loan” isn't one specific type of financial product.
People often use it to describe loans obtained through:
- Banks
- Credit unions
- Other conventional financial institutions
Depending on what you're borrowing money for, a bank may offer:
- Personal installment loans
- Auto loans
- Mortgages
- Home equity loans
- Lines of credit
- Secured loans
- Unsecured loans
So the older idea that traditional bank loans are always secured by valuable property isn't accurate.
Some bank loans use collateral.
Others don't.
For example, the Consumer Financial Protection Bureau describes a personal installment loan as a closed-end loan where a borrower receives a sum of money upfront and repays it through scheduled installments over a set period. Personal loans can be used for expenses such as large purchases, unexpected bills, or consolidating existing debt.
How Do Banks Decide Whether You Qualify?
Requirements vary by financial institution and loan product.
For a personal installment loan, the CFPB says lenders commonly consider factors such as:
- Credit score and credit reports
- Income
- Existing debts
- Loan amount
- Loan term
- Applicable state law
- Other financial information
That doesn't mean every bank requires perfect credit.
A stronger credit history may make it easier to qualify for certain products or receive more favorable terms, but each lender uses its own eligibility standards.
5 Ways Title Loans and Traditional Bank Loans Are Different
Easy title loans and traditional bank loans both end with the same thing - much-needed money being delivered into your account. However, that's pretty much where the similarities end. In fact, there are 5 ways that easy title loans and traditional bank loans are different.
1. The Application Process
With a title loan, you just hop online to submit a short form with basic personal and financial information on it. In some cases, you can even get a preliminary answer within half an hour of applying. But with many banks, you may have to jump through red tape and wait a while before receiving approval.
2. The Ability To Get Approved
The degree to which applicants get approved for title loans tends to be higher than applicants for traditional bank loans. Banks have higher requirements to qualify for a loan, which leaves many borrowers out of cash. This is where a title loan can help.
3. The Payment Plans
Most traditional banks need borrowers to pay back their loans on a specific date determined at signing. Qualified applicants may adjust the due date a bit, but title loan borrowing is more convenient. In some cases, you can dictate whether you want weekly, bi-weekly, or monthly arrangements.
4. The Required Collateral
You'll need assets that are of equal or greater value than the money you're borrowing when you approach a traditional bank. You also need a good credit rating. However, title loans let you borrow large sums of cash based solely on the value of your vehicle alone. They do not need to know your home value, your debt-to-income ratio, or if you have employment.
5. The Payouts
It's hard to tell what a traditional bank will give you until it's time to review the contract. On the contrary, easy title loans give you up to $15,000 in the state of Missouri, meaning you can stop the guessing games and start making serious financial plans with more of an insight into your money.
As you can see, traditional loans and title loans are two completely different loans, with one reserved exclusively for people who have never experienced a credit blunder and the other one available for those who have. Best of all, you don't need to wait for your finances to fail before you get a title loan.
NOTE: With both types of loans, applicants must usually be at least 18 years old to qualify.
How to Get Title Loans Without Going Through Traditional Banks
Many consumers think they're stuck with traditional banks for loans and that's just not true. Just follow these two steps to understand how to get one:
Go Online to Submit Your Application.
Fill out the short form on the Missouri Title Loans, Inc. home page. It should only take a few minutes and you'll get an answer within 30 minutes or less.
Gather Your Required Items Ahead of Time.
Here's what you'll need to bring with you to the title loan locations:
- The vehicle itself for a quick appraisal
- Your driver's license or a government-issued photo ID
- The lien-free title of the vehicle (listed in your name)
Try to also have banking information to make the payout step even more efficient.
Get Easy Title Loans Online Today
Don't go straight to the bank with your borrowing needs. Title loans are a way to avoid all the red tape and still get the money your budget requires now. A Missouri title loan uses a qualifying lien-free vehicle title as collateral, and vehicle value plays a major role in determining the potential loan amount. Missouri Title Loans, Inc. currently offers qualified borrowers up to $15,000*.
Frequently Asked Questions
What is a traditional loan?
“Traditional loan” is a general term often used for financing from a bank or credit union. Depending on the product, it can be secured or unsecured. Personal installment loans typically provide money upfront that is repaid in scheduled installments.
What is a title loan?
A title loan is a secured loan that uses qualifying titled property, usually a vehicle, as collateral. Missouri Title Loans, Inc. requires a lien-free vehicle title for its Missouri title loans.
How do title loans work?
You provide a qualifying lien-free vehicle title, photo identification, and the vehicle for inspection. The vehicle's value helps determine the potential loan amount. If approved, you repay the loan according to your agreement while continuing to drive the vehicle.
Are traditional bank loans always secured?
No. Bank loans can be secured or unsecured. An unsecured personal loan does not require specific property to serve as collateral.
How much can I get with a Missouri title loan?
Missouri Title Loans, Inc. currently advertises qualified title loans of up to $15,000*. The actual amount depends on vehicle evaluation and approval.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.
