Can You Get a Registration Loan If You Have a Title Loan?
Explore how having one existing vehicle-backed loan affects your eligibility for additional financing on the same asset.
Registration loans and title loans are both types of secured financing options. A registration loan typically allows a borrower to use the equity in their vehicle or its registration as collateral, even if the vehicle is still being financed.
A title loan, conversely, requires the borrower to own their vehicle free and clear, meaning there are no outstanding loans or liens against its title. The vehicle’s clear title serves as the collateral for this type of loan. The fundamental difference lies in the type of collateral accepted and the ownership status of the vehicle.
Understanding Registration Loans
Registration loans are a form of secured short-term financing where the vehicle’s registration, or the equity a borrower has built in a financed vehicle, acts as collateral. This type of loan does not always require the borrower to possess a clear title to their vehicle. Instead, it leverages the value of the portion of the vehicle that has been paid off.
To qualify for a registration loan, applicants need an active vehicle registration in their name and proof of consistent income to demonstrate repayment ability. Lenders also consider the vehicle’s value, as well as the borrower’s residency within the state where these loans are available. Some lenders may require a vehicle inspection to assess its condition and market value.
The application process involves submitting the vehicle registration, a valid identification, and income verification documents. Upon approval, a lien is placed on the vehicle’s registration, rather than its title. Loan amounts range from a few hundred to a few thousand dollars, determined by the vehicle’s equity and the borrower’s income.
Understanding Title Loans
Title loans are secured, short-term loans that use a vehicle’s clear title as collateral. The borrower must own the vehicle outright, free from any existing liens or financing agreements. The lender takes possession of the vehicle’s physical title, or places a lien on it, for the duration of the loan.
Eligibility for a title loan primarily hinges on possessing a clear vehicle title, along with the vehicle’s market value, which determines the maximum loan amount. Lenders also require proof of income to ensure the borrower’s capacity for repayment, and verify residency. The loan amounts usually range from 25% to 50% of the vehicle’s resale value.
The application process for a title loan involves presenting the vehicle’s clear title, a valid government-issued identification, and proof of income. A vehicle inspection is often part of the process to appraise its value. Once approved, funds are disbursed, and the vehicle title is held by the lender until the loan is fully repaid.
Simultaneous Loan Eligibility
Obtaining a registration loan when a title loan is already active on the same vehicle, or vice versa, presents significant challenges due to the nature of collateral and lien structures. Lenders offering secured loans typically require a primary or “first” lien position on the collateral. This ensures that in the event of default, they have the primary claim to the asset.
When a title loan is active, the lender already holds the vehicle’s clear title or has a primary lien recorded against it. This encumbrance means the vehicle’s title is no longer “clear,” which is a fundamental requirement for securing another title loan. Furthermore, the existing lien on the title also complicates the ability to secure a registration loan.
A registration loan often relies on the vehicle having unencumbered equity, or at least a registration not already tied to a primary lien. With a title loan already in place, the primary security interest in the vehicle has been claimed. This makes it highly unlikely that another lender would issue a new loan, whether a title loan or a registration loan, against the same vehicle, as their claim would be secondary and thus riskier. Most lender policies and state regulations prevent multiple primary liens on a single vehicle, especially when one involves the vehicle’s title, to protect the lender’s interest.