Despite their apparent similarities, a car’s registration and title are completely distinct. Not just in the eyes of the law, but when it comes to borrowing against them, too. One proves you own the vehicle, the other proves your vehicle is good to hit the road. That distinction matters. Before you apply for either, it’s worth taking a look at what those lenders are really holding as collateral and determining which option might be better for your situation.

What Is a Title Loan?

A title loan is basically a secured loan where you’re using the value of your vehicle as collateral.

Here’s how it goes:

• You’ve got to actually own the vehicle, free and clear (no active loan on it)
• The lender assesses your car’s market value
• In exchange for the total approved amount, you hand over the title deed
• You get to keep driving the vehicle while you’re paying it back

What Is a Registration Loan?

A registration loan is a short-term cash advance based on your current vehicle registration. This means you don’t have to actually own the vehicle outright.

The catch is that not every state in the U.S. allows registration loans. Lenders can only operate in certain states and cities and the rules change from place to place. For example, in Arizona, you can find registration loans in Phoenix, Chandler, Mesa, Tempe and Glendale, offering anywhere from $50 to $4,000. The amount you qualify for usually depends on how much equity is in your car and also your verifiable income.

Some things lenders will check before agreeing to lend:

• Whether your vehicle registration is up to date and not expired or suspended
• Proof that you actually earn enough to pay back the loan
• Info about your car, its make, model, age, mileage and condition to estimate current value and equity
• Basic identity and residency checks

While they might not let the lender take your car like a title lender can, if you can’t pay back the loan, it can still lead to fees, collections and even court action depending on your contract and local laws.

Title Loans

The Upside

• If you own your car outright, lenders might offer you a bigger amount, which is often tied to a fraction of your car’s actual value (often around 50% of its worth).
• Title loans can sometimes have lower interest rates than registration loans. Since the loan is backed by your vehicle, lenders tend to view it as a lower-risk proposition.

Drawbacks to Consider

• You need to own your car free and clear. Lenders don’t compete with an existing lienholder.
• Repossession is always a risk. Miss a payment and the lender can actually take the car to recoup their cash.
• Even if you get to keep driving it during repayment, your car becomes a pressure point.

Registration Loans

The Upside

• You might qualify even if you don’t own your car fully. Registration loans in Phoenix and other Arizonian cities can be a bit more accessible if you’re still making payments on your car.
• Since the title isn’t being used as collateral, the lender can’t repossess your car in the same way a title lender can.
• You get to keep the title. This might not be a big deal for some people, but for those who really need their car, this is a bit of a relief.
• Fast funding. A loan application can take minutes online, a short verification call, an in-person approval in under half an hour and funding within one business day.

Drawbacks to Consider

• No vehicle collateral means more lender risk and that shows up in interest rates.
• Due to the possibility of partial ownership, lenders set the amount smaller than they would for a title loan.

Conclusion

Before you apply, check what you’re actually counting on. Is it your ownership, your registration or your ability to pay it back? That difference decides how much you can actually qualify for and whether bad credit narrows your choices or not. It also determines if you need a clear title, how quickly the money lands in your hands and how much pressure you’ll feel if repayment suddenly gets tight.