Title Loans
A lot of people will tell you that the worst way to borrow money is with a payday loan. In fact that is not true there is one worse option and that would be title loans. This is a loan where you are using your car as security against the loan. It has all of the bad features of a payday loan with the added bonus that if you don't pay it off you will lose your car. Hardly a good way to borrow money.
Title loans are nothing more than a way to borrow money against the value of your car. Really they are no different than a pawn shop except that in this case they only loan against cars. The other difference with a pawn shop is that you can actually hold onto the car and drive it while the loan is still outstanding. The lender will get the title to the car and if you don't pay the loan back they will take possession of the car. These are short term loans that normally have to be paid back in thirty days. The advantage of these loans is that they are easy to get and they require no credit check.
Unfortunately there are lots of disadvantages to title loans as well. The most obvious is that if you don't pay the loan back you are going to lose your car. Given that the amount that you can borrow will be only a fraction of what the car is worth you are basically selling your car for far less than its value. If you have any doubts that you will be able to pay back the loan then you really don't want to take a title loan. In that case you would be better off selling your car than using a title loan.
The other issue with title loans is that they come with absurdly high interest rates. The rates that they are charge are often into the several hundred percent. These rates are extremely high by any standard but especially when you consider that it is a secured loan. Most people don't realize how high the interest is because the loans are so short term but on an annualized basis the cost of a title loan is one of the most expensive that you will find anywhere.
It is rarely a good idea to take a title loan; they are a last resort and even then not a good one. You would be better off selling your car. Payday loans get a lot of bad press for being a bad way to borrow money but even they are better than a title loan, at least you won't lose your car if you don't pay back the payday loan. In truth it is hard to see a good reason to use title loans so the best thing is to just stay away from them altogether.