A registration loan is a type of loan that combines a payday loan and a title loan. These types of loans are available in Arizona and have taken the place of a traditional payday loan. Borrowers must have a vehicle that is registered in their name to be approved.
Registration loans are different from title loans in a few ways, including that the lender cannot repossess the vehicle should the consumer default on repayment. The payment for a registration loan is also due in full on the borrower's next pay date, and the borrowed amount is not spread out in equal monthly payments. Registration loans do not require that a vehicle have a free and clear title, and there is no lien that is placed on the vehicle when the borrower obtains the loan.
Lenders in Arizona created registration loans in 2010, when laws regarding the maximum interest rate that can be charged on a consumer loan were changed. The legislation capped the annual interest rate for payday loans at 36 percent, but registration loans were considered exempt from this cap. Borrowers who obtain a registration loan can expect annual interest rates of up to 204 percent depending on the lender.