Title Loans vs. Registration Loans: What’s the Difference?
When emergency expenses threaten to derail monthly bills, or a personal financial hardship threatens to place excessive stress on daily life, short-term loans can help ease the pain and get consumers back on their feet. Many options exist to help consumers regain their financial footing, but two of the most popular options are title loans and registration loans. These loans, though similar, have a few key differences that might benefit different types of borrowers. Before applying for either type of loan to resolve a financial hardship or pay emergency expenses, it’s important to understand how each loan works and who the ideal customer is for each one.
Title Loans: The Clear Choice for Outright Vehicle Owners
Title loans were conceived as a way to help consumers get access to much-needed funds on a short-term basis, largely by using their vehicle as a way to secure the loan, reduce the risk to the lender, and offer higher approval rates. To that end, title loans do have a few important requirements that borrowers must know before submitting an online application:
- Borrowers must own a vehicle outright, which means they cannot be financing the vehicle or be making payments toward any lien indicated on the title.
- In fact, the title itself cannot contain any pre-existing liens at the time of application for a title loan.
- Borrowers must be able to submit key vehicle details during the application process, including the make, model, year, and current mileage of the vehicle that has a clear title.
- Borrowers must consent that their title can have a lien placed on it by the title loan company, and that the vehicle can be repossessed for nonpayment in the event that the borrower fails to meet their obligations to the lender.
These requirements are actually very easy for most people to meet, since the vast majority of Americans currently own their vehicles outright and do not finance or lease that vehicle on a monthly basis. As long as the vehicle is owned outright, and the borrower is listed as the owner of the vehicle on a clear title without any liens, they’ll likely qualify for a title loan and be met with approval after submitting the online application.
Title loans base their value on the value of the borrower’s vehicle, which is a big benefit of this type of loan. Because loan amounts are based on how much the vehicle is worth, most borrowers will be approved for a larger loan balance than they would be with a payday loan product. This makes title loans a great fit for people who need a larger sum of money to help with emergency expenses, financial shortfalls, and other unforeseen circumstances.
One major drawback of title loans, however, is that they’re simply not open to people who are leasing or financing a vehicle on a monthly basis. Because those vehicles cannot be secured with an additional lien, lenders consider them ineligible as a form of security and borrowers will typically be declined when submitting an application. Registration loans, on the other hand, allow these borrowers to gain access to the short-term funds they need to resolve a personal financial hardship.
Registration Loans: The Alternative for Borrowers Without a Clear Title
It’s easy to get approved money from a title loan with a fully owned vehicle and a clear title, but that option just isn’t on the table for people who are still making payments toward full vehicle ownership. Luckily, an alternative exists. Registration loans were first offered in Arizona as a way to offer borrowers more short-term lending options and to comply with revised state regulations concerning both payday and title loans throughout the state. Today, they’re increasingly available in other states across the country where borrowers without a fully owned vehicle need access to short-term funds.
In order to qualify for a registration loan, borrowers will need to meet a few requirements that are a bit different from those required of title loan borrowers:
- Borrowers must at least be financing or leasing a vehicle, and that vehicle must be in their own name in order to qualify for the registration loan.
- Borrowers must have a current vehicle registration and driver’s license in their current state of residence, as indicated on the loan application.
- Borrowers need to have important vehicle details on hand during the application process, including the make, model, year, and mileage of the vehicle that is currently being financed. This is also the vehicle that must be shown on the borrower’s registration card.
- Borrowers must acknowledge that their vehicle cannot be repossessed, nor can an additional lien be placed against the vehicle, but traditional collection practices will apply in the event of nonpayment of the loan balance.
Unlike title loans, the maximum loan amount issued by a registration loan company is not based entirely on the amount of the vehicle being financed. Instead, borrowers must submit information about their current employment and income, several personal references, and personal contact information. These are the factors used by a lender to generate a loan estimate and to determine final approval of the loan.
It should also be noted that, because this type of loan doesn’t use the vehicle’s value to determine the loan amount, most borrowers will be approved for smaller maximum loans when submitting a registration loan application. This makes registration loans an ideal choice for borrowers who need a smaller sum of money, perhaps to pay one bill or to offset a smaller financial shortfall overall.
Similarities: Both Loans Have Great Benefits for Borrowers
Though the requirements may differ between title loans and registration loans, both products have an identical set of benefits for borrowers who need short-term cash to cover financial shortfalls. Indeed, the list of benefits is extensive:
- Both loans can be approved in just a few minutes, or a few hours, after the application has been submitted.
- Each loan offers an instant estimate of the balance and a personal consultation with a loan representative who will review the loan amount, repayment schedule, fees, and other details.
- Both loans can be repaid in just a few weeks, compared to bank loans that often take as long as five years to repay in full.
- Once a loan has been fully approved and funded, borrowers will typically find the full loan balance in their bank accounts just one business day later.
- Title and registration loans are both subject to stringent state regulations, as well as federal regulations, that ensure an ethical, consumer-friendly approach to lending. These laws concern everything from the repayment period to the fees and interest rates charged to borrowers during the repayment process.
Get Started Today with These Two Great Options
Title loans and registration loans both help consumers overcome financial problems and move past them, with quickly approved money and short-term repayment periods that will put the incident in the rearview mirror after just a couple of weeks. These benefits are only available to borrowers who submit an application and speak to a loan representative, so it’s important to start the online application as soon as possible.