One of the biggest drawbacks of title loans is the loan terms which is usually within two weeks to a one month period. While borrowers can apply for a bigger amount of loan when compared with other types of fast loans like cash advance and payday loans, the time given to settle or repay the loan is really very short. Thus, quite a number of borrowers are having a difficult time managing repayment terms and many lose their vehicles and eventually ruin their financial positions furthermore. Why do you think is this kind of loan so short term? Here are some reasons:
Cars lose their values
One of the problems of investing in automobiles is that only a few of these will have an increase in terms of resale value. Because it is depreciated annually, car owners do not actually recover their investment, instead just enjoy the comfort of having a personal ride instead of using public transport. Because of depreciation, creditors are wary of the actual resale value of cars; thus, giving only a short term period for borrowers to repay the loan.
No rigid credit check
If you are familiar with this kind of loan, you know that there are no strict credit background checks and submission of tons of documents to back up your credit worthiness. The requirements are so easy to comply with such as ensuring that the car is registered under your name and without legal encumbrances. This is quite a risk; thus, creditors will want to recover their investment to borrowers by providing them only short term credits.
Borrowers with poor credit rating are allowed to avail
There is no credit like fast credit because it does not discriminate borrowers with a negative credit rating. Title loan companies believe that each borrower should be given a chance to recover. However, since there is already an inherent risk involved when these creditors favor borrowers with low credit rating, such companies can only offer short term loans to guarantee that they can recover money lent to risky borrowers.
Prone to abuse
It cannot be denied that there are borrowers holding different credit accounts simultaneously. It can only mean that the borrower is indeed having problems financially and giving short term loans is the only way for the borrower to be conscious and act immediately on his or her debts. There is a tendency to procrastinate on payment if the borrower is aware that he or she has so much time on hand to repay the obligation.
Not regulated by laws
Truthfully speaking, the government is also at fault why fast loans can only give short term loans because there is no actual law mandating these loan companies to offer a lengthier payment period for borrowers. The most it can do to these loan companies is to monitor their activities especially on the interest rates and customer complaints.
There you go, your questions are answered with regards to reasons why title loans companies can only offer short repayment period and it involves risk as the most important reason.
Cars lose their values
One of the problems of investing in automobiles is that only a few of these will have an increase in terms of resale value. Because it is depreciated annually, car owners do not actually recover their investment, instead just enjoy the comfort of having a personal ride instead of using public transport. Because of depreciation, creditors are wary of the actual resale value of cars; thus, giving only a short term period for borrowers to repay the loan.
No rigid credit check
If you are familiar with this kind of loan, you know that there are no strict credit background checks and submission of tons of documents to back up your credit worthiness. The requirements are so easy to comply with such as ensuring that the car is registered under your name and without legal encumbrances. This is quite a risk; thus, creditors will want to recover their investment to borrowers by providing them only short term credits.
Borrowers with poor credit rating are allowed to avail
There is no credit like fast credit because it does not discriminate borrowers with a negative credit rating. Title loan companies believe that each borrower should be given a chance to recover. However, since there is already an inherent risk involved when these creditors favor borrowers with low credit rating, such companies can only offer short term loans to guarantee that they can recover money lent to risky borrowers.
Prone to abuse
It cannot be denied that there are borrowers holding different credit accounts simultaneously. It can only mean that the borrower is indeed having problems financially and giving short term loans is the only way for the borrower to be conscious and act immediately on his or her debts. There is a tendency to procrastinate on payment if the borrower is aware that he or she has so much time on hand to repay the obligation.
Not regulated by laws
Truthfully speaking, the government is also at fault why fast loans can only give short term loans because there is no actual law mandating these loan companies to offer a lengthier payment period for borrowers. The most it can do to these loan companies is to monitor their activities especially on the interest rates and customer complaints.
There you go, your questions are answered with regards to reasons why title loans companies can only offer short repayment period and it involves risk as the most important reason.