The pros and cons of title lending versus record lending

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LOS ANGELES, December 23, 2020 /PRNewswire/ — When an emergency arises and you need cash fast, using a vehicle as collateral for a loan can be a good solution.

But if you’re considering a title loan or a record loan, it’s 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 recording loan?

First of all, it is essential to distinguish between the title of a vehicle and its registration. The title is used to indicate 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 key distinction between these two types of loans is that a title loan requires proper title in the name of the loan recipient. A clean title means there are no outstanding loans or outstanding tickets that would prevent the sale of the vehicle. In contrast, registration loans only require that the registration be in the name of the loan recipient, regardless of who is identified by the title of the vehicle.

The advantages of a title loan

  • Loan amounts can be higher – 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, lenders can give more money because they are more likely to be repaid.
  • Interest rates are lower – Interest rates on title loans are usually slightly lower than registration loans due to the security provided by the title of the vehicle.

The disadvantages of a title loan

  • The vehicle can be repossessed – Since the title is surrendered to receive the loan, the loan company may attempt to repossess the car if it is not paid back on time.
  • The title must be clean – This means that there are no liens on the vehicle, whether it’s an outstanding car loan or unpaid tickets.

The advantages of an enrollment loan

  • The vehicle can be financed – A borrower does not need to fully own the car to be eligible for a registration loan.
  • The car cannot be repossessed – Since the title is the piece of documentation that signifies ownership, a loan company cannot claim the vehicle based on possession of registration alone.

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 rating to determine the loan amount. This means that record loans may not be readily available to someone who is unemployed or working to build better credit.
  • Loan amounts may be lower – Record loans are often smaller than title loans and usually come with higher interest rates.

What is the best option?

The choice between a title loan and a registration loan depends entirely on the circumstances of the borrower. Registration loans tend to be beneficial for borrowers who need a small amount of money and still pay off their vehicles. Title loans work best for car owners with a clean title looking to access more funds.

Either way, it’s important to understand the loan requirements and repayment expectations before signing the vehicle title or registration.

Notice: The information provided in this article is provided for informational purposes only. Consult your financial advisor about your financial situation.

SOURCE Moving America Forward

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