Scam, Scandal or Helpful in Struggling Economy?
Many people think any type of short term loan is a scam. Many believe that if the loan does not require a credit check that is must be illegitimate. Many think that if a loan does not require collateral then the lenders must be up to something. Are all these myths founded in truth?
What the Real Facts are about Down Payment Loans
VehicleMicroFinancing.com strives hard to make cash available for all and not just the privileged who happened to make it through their twenties with a credit score. Our down payment assistance program helps real people get into vehicles they need to get to work everyday. Call it what you may but you may be interested in the following facts.
Credit Restrictions are the Culprit
Now that the credit companies have increased the minimum credit score for just about everything, there are millions of hardworking people who can’t get into vehicles and homes that they deserve. It is debatable whether it was bad lending practices or straight up greed and corruption that ruined the housing industry. We lean toward the later.
Why the Myths Exist
Many people who “have” seem to voice the opinion that “poor” risk borrowers did not deserve the loan in the first place and that is why the housing mess blew up. The reality from our (http://vehiclemicrofinancing.com) perspective is that every hardworking person deserves a home and a vehicle whether or not society deems that person’s profession as making them a “poor” risk. It isn’t the hardworking laborers of this country that cause the problems. If that were the case why all the white collar “corruption” investigations?
Quick Undeniable Facts
To address the usual arguments against these type of loans I will be brief. These loans do not create a hard inquiry on borrowers reports with credit bureaus. They do not require extensive income or identity verification apart from the information required on the application. Spendable cash can be direct deposited into the borrowers account in as little as 2 hours, although depending on the time of day it can be the next business day.
Our Interest in Success
We get paid a fee for the applications that meet minimum underwriting criteria regardless of whether the borrower actually completes the loan transaction or not. We share 60% of that commission with the dealerships and websites that refer the borrowers to us and 20% goes to the professional Call Center that provides phone applications and customer service.
Who Gets the Money
Our typical approval rating looks like this: Around 20% of traffic fill out an application and of those 25%-30% get approved for a loan. The average commission we get is $45. Subtract the 20% for the Call Center of the top, then divide the rest as follows. There is 20% for the commission tracking and accounting company, and 60% for the referrer for payouts and we get $7.20. On the high end, when someone applies online instead of over the phone and we generated the application organically (not referred) we would get $36.
Why We Are Here
Although we are a for-profit business you would think we were a non-profit by looking at these numbers. Being that as it is, we believe in getting the word out about this rebranded version of a short term loan. We believe it will help dealerships by allowing them to ask more per vehicle for the down payment which equals lower monthly payments and in some cases a lower interest rate.
Do Loans Cause Car Payment Problems?
Most dealerships and banks give borrowers 45 days until their first car payment is due. That gives the average borrower 2 or 3 pay periods to pay off the loan before their first car payment is due. In reality though most lenders will negotiate what is called “installment loans” and these can be drawn out as long as 5 months in some cases without rollovers. We inform dealerships and car lots that their buyers can negotiate these terms in many cases, if the borrower needs it. Additionally, if the lender doesn’t provide the loan the borrower wants, the borrower is not bound to accept the loan. In these rare situations the dealership or referrer still gets their commission.
What is The Worse Case Scenario
Worst comes to worst, most borrowers know that if they don’t pay the lender for a couple weeks or months that nothing will happen to their credit. Trade that situation for not making a car payment, house payment, etc. and see what a world of difference in “risk” to the borrower their is. It is interesting that people always worry about risk to the lender and not the borrowers. We are on the side of the borrowers and struggling car dealers and not on that of the big banks and financial institutions that fund most of these loans.
