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car title loan or cash loan – what to choose?

An alternative option to finance the cost of purchasing a motor vehicle compared to a car title loan may be a cash loan. In fact, every bank in Poland offers a cash loan, i.e. the basic loan product, which usually does not require the borrower to establish collateral for repayment in order to take out.

Its characteristic feature is that it does not need to disclose the purpose of the loan to the bank. Unfortunately, car title loans require it. Therefore, if we first want to ensure financing of the investment in our own vehicle, and only then look for it, we should choose a car title loan.

Many people who want to buy a vehicle ask themselves what to choose: car title loan or cash?  However, the answer in this case is unequivocal.

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In financial terms, a cheap car title loan is more profitable, as it involves lower costs for the customer than with a cash loan. This is due to the fact that banks, when granting a car title loan, have a number of different collaterals in the event of default.

The most common ones are  registered pledge, misappropriation as security  and  assignment from an AC policy . A cash loan has a higher interest rate, because it does not have as many collateral as a car title loan, and therefore it must simply be more expensive.

It is not always possible to take out a car title loan for a used vehicle over 10 or 15 years old, and with cash loans, it is not a problem to buy a long-term car. When buying a used car on a car title loan, you can expect a higher interest rate on the liability than when financing a new car.

And what documents are necessary to obtain a car title loan for the company? In this case, it is necessary to provide an excerpt from CEiDG or KRS, a certificate of non-arrears with taxes from the Tax Office and attach financial statements. The advantage of such a solution, however, is the possibility of including, for example, interest and handling fees in the company’s operating costs.

It is associated with the right, but not the obligation, to buy the car after the end of the leasing contract.

  • financial leasing (similar to a car title loan),
  • operational leasing (treated as a service).

The main difference between a car title loan and leasing is that in the case of the latter solution, an own contribution is required, which can be from 1%. car values.

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A comparison of cash and car title loans shows that they have their advantages and disadvantages. The following are the benefits of using a car title loan:

favorable terms of loans offered by banks for specific car brands,

long loan period.

The downside is the difficulty in obtaining such a loan and the need to complete many formalities, including establishing a security for repayment. The lender becomes the co-owner of the car and remains so until the end of the loan agreement. For many people it may be burdensome to present many documents, not only confirming identity, but also those verifying the income achieved.

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