Many of those who oppose quick and instant loans like auto title loans point out that this type of loan does not actually help improve one’s financial position but instead it encourages people to ruin their finances. With this contention, it is right that borrowers need to be enlightened on how an auto title loan and other kinds of instant loans can damage their cash position. In this way, they will be able to discern whether borrowing from this type of loan is indeed favorable or unfavorable.
High interest rates will make you pay more. Borrowers already knew about this yet they are still willing to gamble and hope that sooner or later, their financial problems will be solved with the help of title loan companies. However, there are other factors which undermine their careful planning to repay the loan.
- One is that the supposed financial windfall like bonuses and commissions did not materialize and as a result, borrowers will take out another loan to pay an existing loan.
- In some cases, economic conditions become very depressing that money becomes even tighter and loan companies have to adjust their interest rates to factor the impact of a negative economic condition. Thus, you have to ascertain that the interest levied on your loan is fixed or not. When it is not, then you end up paying additional expenses for your loan.
Losing your car will make you earn less. In cases when the borrower defaulted, he or she automatically loses the car. With that, the income generating activities are compromised and the borrower find himself or herself lacking more in cash and all the more that there is a need for additional loan to cover the deficit. Indeed, losing your precious car is one sure way to ruin your finances.
- Payment terms too short term and difficult to meet when you have no other income. Repayment term is another issue with instant loans like car title loans. Borrowers expect that they will have a longer payment period considering that the amount they loan is quite bigger when compared with payday or cash advance loans due to collateral, which is the car. However, this is not the case as there are risks involved and loan companies need to recover the money loaned out to borrowers immediately to avoid losing it due to risks and other aversions.
- Appraisal is a subject matter and sometimes do not meet your expectations. Yes, some borrowers count their chickens even though there are no eggs yet. These borrowers make the mistake of assuming that they will get huge loan proceeds yet at the end of the day, only half of the expectations were met. As a result, they find themselves in a precarious position with virtually little cash on hand to answer their cash problems. Thus, another loan is taken out to offset the deficit.
Financial ruin is a problem that can be avoided even if the borrower has loans like auto title loan and among others. It is just a matter of lowering expectations, financial management, and prudence. It is a responsibility only the borrower can assume.
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