A few years ago we saw many lenders that were offering payday loans with an interest that was incredibly high, at around 400% per year. This changed since financial law modifications all around the world made this illegal. It led to a cap that was put on the interest rate that could be charged by a payday lender. Because of the caps, creditors came up with the registration loans, which were devised to avoid interest rate caps.
Registration Loans – A Definition
When we compare the registration loan with the regular payday loan we can see the fact that there are no real differences that are major. A huge one stands in the fact that the applicant needs to have a vehicle that is registered in his/her name for qualification purposes. Because of the fact that the registration loan is rather new on the market, even vehicles that were not completely paid off can be used for getting money.
Registration Loan Default
A registration loan is not going to put lien on car titles. This means that creditors will not be allowed to repossess cars upon defaults. However, there are different contract clauses that are included by some lenders in order to gain some sort of extra security in the event that repayments are not possible.
One thing that many do not know is that when the borrower files for bankruptcy on such a loan, creditors cannot contact you in order to collect the cash. Automatic bankruptcy stay is to protect people from dishonest collection efforts. Just remember that this will not necessarily apply with the title loans.
Understanding Title Loans
The auto title loan is really similar to the traditional loan as the vehicle is used as collateral. Registration loans stand out as more similar to the payday loans. It is expensive to deal with the title loans because they will not be included in the cap for the interest so it is really common to end up faced with annual interest rates of around 200% when you apply for title loans. The vehicle that you offer as collateral has to be free of liens. Any lender needs this because you cannot put lien on vehicles that already have a lien.
Title Loan Defaults
In the unwanted scenario in which you have a title loan and you fall behind on payments, lenders will be allowed to repossess vehicles. This is because of a really simple reason: technically speaking, the vehicle is now the property of the lender until the loan is repaid. When contract breaches appear, they can take possession of the cars. When you do not repay title loans, lenders can repossess vehicles after or before bankruptcy.
Make sure that you consider all the options that are currently available for you. The more information you have about the lenders and how they did business in the past, the higher the possibility you will make a correct choice. Getting money is something that can go smoothly but you need to make a correct choice.