The Advantages and Disadvantages of Securities Lending Versus Registration Lending
LOS ANGELES, December 23, 2020 / PRNewswire / – When an emergency arises and you need cash quickly, using a vehicle as collateral for a loan can be a good solution.
But if you are considering a title loan or a registration loan, it is essential to understand what defines these very different types of loans. Although both are related to the use of a vehicle in exchange for funds, these two types of loans have their own advantages and disadvantages.
What is the difference between a title loan and a registration loan?
First, it is essential to distinguish between the title of a vehicle and its registration. The title is used to indicate the ownership of the car. When a vehicle is sold, title will transfer from the current owner (often a dealership, bank or private seller) to the buyer. On the other hand, a registration means that the vehicle can be driven legally.
With this in mind, the essential distinction between these two types of loans is that a title loan requires a blank title in the name of the loan recipient. A blank title means that there are no outstanding loans or unpaid tickets that would prevent the vehicle from being sold. In contrast, enrollment loans only require the registration to be in the name of the loan recipient, regardless of who the vehicle title may identify.
The benefits of a title loan
- Loan amounts may be larger – With a title loan, the loan amount is based on the value of the vehicle. By securing the loan by offering the title as collateral, the lenders can give more money as they are more likely to be repaid.
- Interest rates are lower – The interest rates on title loans are generally slightly lower than those on registration loans because of the collateral provided by the title of the vehicle.
The disadvantages of a title loan
- The vehicle can be taken back – Since title is turned over to receive the loan, the loan company could attempt to repossess the car if it is not paid back on time.
- The title must be clean – This means that there is no lien on the vehicle, whether it is an outstanding car loan or unpaid tickets.
The advantages of a registration loan
- Vehicle can be financed – A borrower does not need to be the outright owner of the car to be eligible for a registration loan.
- The car cannot be taken back – Since the title is the document that signifies ownership, a loan company cannot claim the vehicle on the sole basis of possession of the registration.
The disadvantages of a registration loan
- Credit and income are factors – Since a registration loan is unsecured, lenders will use standard loan requirements such as employment and credit score to determine the loan amount. This means that registration loans may not be readily available to someone who is unemployed or who is working to get better credit.
- Loan amounts may be less – Registration loans are often for lower amounts than securities loans and usually have higher interest rates.
What is the best option?
The choice between a title loan and an enrollment loan depends entirely on the borrower’s circumstances. Vehicle registration loans tend to be beneficial for borrowers who need less money and still pay off their vehicle. Title loans work best for owners of cars with proper title who are looking for access to more funds.
Either way, it’s important to understand the loan requirements and repayment expectations before signing the title or vehicle registration.
Note: The information provided in this article is provided for informational purposes only. Consult your financial advisor about your financial situation.
SOURCE Advancing America