Issues and concerns about car title loan focus on the repossession aspect of the loan. Borrowers and other people are aware that in case they cannot pay the loan on time and they have already exhausted their roll over privileges, the lending company will repossess the car as payment for the loan. However, there are other interesting ideas about this kind of loan which other people are not aware of and might be a consideration when formulating state policies to govern car title loan and other similar forms of credits.
Poor Borrowers Are Good Payer
It has already been established in many academic studies that poor and regular borrowers tend to resolve their obligations as opposed to rich people. This can be attributed to the fact that small borrowers have something bigger to lose when they cannot fulfil their loan obligations; they will find that no creditors will lend them money at the end of the day. Rich people have assets to leverage and in fact some of their loans are pure accommodations by bank in order to show their CEOs that the bank is performing and loaded with rich clients.
Poor Borrowers Are Very Optimistic
The reason why millions of borrowers are not afraid of short term periods and high interest rates is because they are positive that they can repay any kind of loan that they will avail. Thus, they are also not afraid to take out several loans from different loan companies. In some studies, only a small percentage of borrowers were not able to repay the loan and almost 80 percent of instant loan borrowers fulfil their obligations.
Instant Loan Companies Are Not Particular with the Way Loans Are Allocated
Car title loan companies accept almost all kinds of reason when they decide to approve for a loan. In addition, these companies do not monitor if borrowers really spend the loan proceeds on the reason stated. Thus, the loan is prone to abuse and misuse and as a result, borrowers end up accumulating loans and credits and find themselves having difficulties meeting the obligations. With this, it is important that car title loans companies will revise their policies on reasons for accommodating the loan in order to help borrowers avoid getting into debt traps.
Only a Small Percentage of Cars Were Repossessed
This could be due to the fact that poor and middle class borrowers have more to lose than rich people; hence, they are really moving heaven and earth to pay the loan. Thus, it is not right to accuse car or auto title loans companies that they are exploitative. Policy makers should look into this aspect if they want to help millions of borrowers get a better bargain when it comes to this kind of loan.
Based on the above ideas, you can conclude that a car title loan is not really that bad. Some people just focus on one aspect of the loan and ignore other positive aspects like borrowers meeting their loan obligations and only a small percentage of cars were actually repossessed.
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