Like its neighboring state of California, Arizona has been attempting to reign in what is known as “unsecured and secured lending” since the early 2000s. They have made the use of the payday loan model illegal. But those who face challenges getting consumer credit or traditional loans in Arizona can still access what is known as a registration loan.
A registration loan sounds a lot like what is known as a title loan, but they are not the same. The state allows lenders to issue both kinds of loan, though, and they differ in a few ways.
- Registration Loans – This is a loan that requires you to have a vehicle registered to you, but it does NOT have to have a “clean” title. In other words, you don’t have to own the vehicle outright to take a loan against the equity in the car. You just have to be named as the person who holds the registration.
- Title Loans – These are loans that require you to have a clean title without any liens, which allows you to then use the vehicle as collateral on a loan. In other words, this is a “secured” loan and something that the state of Arizona has not challenged.
Why does Arizona make the registration loan available? It all boils down to options for consumers. Because state laws prevent the use of Payday loans, both lending companies and consumers wanted to find a way to still provide unsecured loans, and the registration loan was born. They cannot exceed the state’s lending caps and if the paperwork that outlines your loan fails to state a cap, the interest rate is automatically set to 10%. This enables many who might not otherwise qualify for loans to obtain the funds needed. However, they are still full of hurdles that have to be cleared before they can be funded.
How to Get Approved and Funded
Applying for a registration loan through a qualified lender is also a bit different than if you applied for a cash advance. Much like what it takes to get an online title loan, you’ll need to show proof of income and meet certain age and employment requirements. If you’re in the military you can forget about applying. No registered lender in Arizona will allow you to use your vehicle as collateral in Arizona.
There may be a need for multiple checking accounts or banking details, including pay stubs or documentation of direct deposit paychecks. This is because the loans rely heavily on being repaid. Though the lender has the ability to take the borrower in default into collections or even to civil court where they can pursue the funds, it is a costly affair. Thus, the lenders want to be absolutely certain that a borrower is highly likely to be able to repay the loan according to the terms extended. Even though most companies operate throughout Arizona, there are a few online lenders that limit their applicants to the metro phoenix area. These companies are likely to fall under Maricopa County regulations as well.
All borrowers will have to agree to Fair Debt Collection Act practices should they default on the loan, as well. If you are wondering whether you can be leasing a vehicle rather than just financing it, the answer is yes. As long as the registration is in your name (the person applying for the loan), the lending company will consider making an offer. This is because the registration loan differs from the title loan in that it does not take the value of the vehicle into consideration as the only deciding factor. Instead, it considers the employment and income details, and may even accept personal references.
Will the registration loan end up being close to the amount that online title loans offer? Actually, they are usually a bit smaller because of the simple fact that the title is not clean (i.e. the vehicle is unable to be used as traditional collateral).
Can you apply for a title loan online or in person?
As the title above asked, do you have to do an in-person meeting in order to obtain a registration loan? The answer is both yes and no, or more of an either or answer. There are many lenders that allow you to submit your details through an online application process. You may also find some with storefronts that will walk you through the application. As an example, you can apply directly using the Desert Title Loans online application. Or you can walk into to any of our Phoenix or Flagstaff locations.
Once approved, most will be able to wire the funds or you can head back to a storefront and collect the cash or cashier’s check. There is not a requirement for anything other than a financial evaluation and a look at the value of the vehicle offered. Right now, Arizona is the only state that promotes the registration loan concept as an alternative to a payday loan or car title loan. This is because it is one of the few states where the payday options are not allowed. With state laws changing, and payday lenders decreasing, it will be interesting to see if Arizona changes its position or if the registration loan model begins to appear in other states.