Car title lenders are considered to be predatory lenders, since they charge high rates of interest to those individuals whocan least afford it. Various laws in recent years have attempted to curb the high interest ratesand these practices. Car title lenders still operate and some would argue that they fill a need insociety. Individuals using car title lender services typically are poor and have no other way toborrow funds. An LA Times report in 2015 stated that about 1 out of 9 car title loans end in theborrower’s car being repossessed.An NBC report found that the average car title loan is $950, and borrowers take an average of10 months to repay the loan. Typically, consumers can borrow up to 26% of the value of theircars and the lender charges 25% per month. This interest rate means a consumer borrowing$950 would pay about $238 per month in interest, or $2,375 over the 10-month period that the$950 was borrowed.One consumer lender is LoanMax, which loans cash in exchange for a car title. The potentialborrower brings in a free and clear car title (i.e., has no liens on it), the vehicle, and his/herphoto ID to a LoanMax location. LoanMax determines how much cash it will loan the personbased on the value of the vehicle. The borrower signs paperwork and departs LoanMax withcash in hand. No credit check is performed. Loans range from $100 to $10,000. Cars can berepossessed if the borrower does not pay.Requirements1. Let’s say an individual borrows $500 cash from LoanMax. Does LoanMax have areceivable or a payable when it hands over the cash to the borrower?2. When LoanMax disburses the cash at the time of borrowing, how are its assets, liabilities,and equity impacted?3. Do you think the car title loan process is ethical? Explain your point of view.
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Car title lenders are considered to be predatory lenders, since they charge high rates of interest to those individuals who
can least afford it. Various laws in recent years have attempted to curb the high interest rates
and these practices. Car title lenders still operate and some would argue that they fill a need in
society. Individuals using car title lender services typically are poor and have no other way to
borrow funds. An LA Times report in 2015 stated that about 1 out of 9 car title loans end in the
borrower’s car being repossessed.
An NBC report found that the average car title loan is $950, and borrowers take an average of
10 months to repay the loan. Typically, consumers can borrow up to 26% of the value of their
cars and the lender charges 25% per month. This interest rate means a consumer borrowing
$950 would pay about $238 per month in interest, or $2,375 over the 10-month period that the
$950 was borrowed.
One consumer lender is LoanMax, which loans cash in exchange for a car title. The potential
borrower brings in a free and clear car title (i.e., has no liens on it), the vehicle, and his/her
photo ID to a LoanMax location. LoanMax determines how much cash it will loan the person
based on the value of the vehicle. The borrower signs paperwork and departs LoanMax with
cash in hand. No credit check is performed. Loans range from $100 to $10,000. Cars can be
repossessed if the borrower does not pay.
Requirements
1. Let’s say an individual borrows $500 cash from LoanMax. Does LoanMax have a
receivable or a payable when it hands over the cash to the borrower?
2. When LoanMax disburses the cash at the time of borrowing, how are its assets, liabilities,
and equity impacted?
3. Do you think the car title loan process is ethical? Explain your point of view.
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