Rule Change Among Loans

Posted on Posted in Finance

With the pending new rules on loans proposed by the Consumer Financial Protection Bureau then there will be a major shakeup among lenders and debtors. The verification process for lenders would become lengthy, as they would now have to check if the borrower is indeed capable of paying out the loan. They cannot right away grant loans without doing a background check except for loans that are worth $500 and below with interest rates of 35{d74f41b5402e74e1cdba7de8504ea9e96c817a02eba222c9725b6f264ee1a50d} or less.

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The types of loans that are greatly affected by the rules amendment are payday loans and other expensive short-term loans. Payday loan is the most common loan taken advantage of by employees here in America. More than 50{d74f41b5402e74e1cdba7de8504ea9e96c817a02eba222c9725b6f264ee1a50d} of people who are in the workforce apply for a payday loan every now and then and most of them even take successive loans up to 4 times straight. Another loan that is also commonly used is the installment loan that is almost in the same nature as the payday loan except that it is not charged through the salary but paid back over time in scheduled payments. Another type of loan that is covered by the rule amendment is the auto-title wherein borrowers put up their vehicles as collateral for their loan. Their cars will eventually be mortgaged by the lenders once they are unable to pay off their loan.

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The Effect of the Rules

The newly proposed rules greatly benefit the borrowers more than the lenders. This is because the CFPB feels that the lenders are trying to choke borrowers instead of providing financial assistance because of their expensive fees and very strict payment guidelines. This would shape up the loan industry for good. For more info on the new loan rules, visit chicagotribune.com for complete details and the full article.

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