Vehicles are valuable assets, and you can use yours to borrow money by getting car title and registration loans. These two loans are similar, but have a few key differences that make them suitable for borrowers in different situations. Read on to learn about the differences between car title and registration loans to decide which option is right for you.


What is a car title loan?

A car title loan is a short-term loan that uses your vehicle as collateral. To qualify for this loan, many title lenders require you to own your car outright. Title loan amounts are generally based on your vehicle’s value. After you fill out an application, the lender will appraise your vehicle and offer you a loan amount typically worth 25 – 50% of its value. If approved for a title loan, you’ll hand the lender your vehicle’s title in exchange for your loan amount. You can continue driving the vehicle while you repay the loan.

Car title loans often have more lenient credit score requirements, so you can still get approved with poor or fair credit. Plus, since this loan is secured by collateral, you can often get larger amounts at lower rates. Just keep in mind that if you default on a title loan, the lender may be able to repossess your car.


What is a car registration loan?

A car registration loan uses your vehicle’s registration instead of its title, meaning your vehicle itself isn’t collateral. The lender may consider your income when making an approval decision. Unlike title loans, registration loans don’t require you to own your vehicle outright. This makes it easier to get a registration loan, but these loans usually come with higher rates and in smaller amounts.

Additionally, the lender may not be able to repossess your car if you default on the registration loan. But they may sue for the unpaid balance or sell your debt to a collections agency if you don’t repay what you owe.


Which loan is right for me?

Both car title and registration loans can work well for different borrowers. If you own your vehicle outright and want to get better rates, a car title loan could be a good choice. These loans also work well if you have poor credit, since many lenders approve borrowers with all types of credit scores.

On the other hand, car registration loans might be the right choice if you don’t yet own your car outright. Rates and terms may not be as good, but these loans can be more accessible — and the lender usually can’t repossess your car if you default. Regardless of which loan you choose, make sure to shop around for good offers and make sure you have a plan to pay the loan back to avoid negative consequences.

Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.

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Name: Michael Bertini
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