Chris Dominguez
Sangla ORCR has received many negative criticisms throughout the years. Typical for any secured loan product, really. Much of these criticism boils down into 4 things:
1. It targets the “low-credit” and therefore most likely “low income” demographic as well.
This is true but how else would low-credit people be able to acquire the funding that they badly need? Not to mention a secured loan can even be their stepping stone towards fixing their bad credits provided they do not default yet again on their loan. These benefits far outweigh any sort of negative implications of applying for said loan.
2. It appears to critics that Sangla ORCR is a different-looking form of, and yet fundamentally the same as, loan-sharking.
This is a bit ridiculous. Interest rates for Secured Loans are generally lower than Unsecured ones because, as the name suggests, the loan provider is already assured of a means to recuperate the money (or at least a portion of it) that they loaned. There’s just no reason to raise the interest more than necessary. The rate is just as, if not lower than, those of your typical non-collateral loan products.
3. The impression of the car being in the possession of the lender still lingers.
You most likely already know now that that just isn’t true. Only the registration will be taken. The car stays with the borrower as his means of transport for work or as his source of income if used commercially.
4. And what will be our main focal point here, is the argument that banks and financing companies seem to relish in their capability to take their borrowers’ assets, in this case, their vehicle/s.
This is absolutely false, though. As much as possible, companies would prefer that the loan be settled by the borrower by fully-paying the loan and interest. Towing the vehicle is their LAST RESORT and aside from them feeling bad for the borrowers, there are 4 other factors why this is the case:
Complication of Recovering The Vehicle
Most defaulters do not go the extra mile of delivering the unit themselves to the loan company, and understandably so. Which is why the companies will have to do it themselves, and it’s not easy. If the company has not already invested a significant sum to own their own towing department, they will have to acquire the service of a 3rd party. This lowers the overall amount of money they earn from this one application.
Also, towing the vehicle away from its previous owner is not easy. You don’t just show up and pull the unit and the job is done. You must first make sure that all the necessary authorities are informed of your operation, specifically, the local government (barangay officials, etc.) and the officers of the previous owners’ residence and more often than not, these entities are not really that swift in their processes. All these must be done to ensure the cops won’t be called on the company. A hassle that would be easy to resolve but a completely unnecessary hassle nonetheless.
There’s also the fact that some defaulters would try to hide the unit – not very wise as the company already has the registration and can request for the law to intervene and enact the inevitable. But as you can imagine this is yet another hassle that they wouldn’t really want to go through.
Processing of Transfer of Ownership
According to the Land Transportation Office (LTO). the turnaround time for a transfer of car ownership takes up to 7 days, but in reality it takes up to 21 to 30 days depending upon the district office where it will be processed.
Some companies even provide a 30-day allowance to the defaulter before they start the transfer process. This is to avoid having to spend resources and then cancelling halfway through because the owner would like to negotiate.
Just this process alone already takes 60 days of time where the company is not earning anything from the application.
Auction/Reselling
Some companies try to sell their repossessed units via auctions while some sell them to prospecting buyers of second hand units.
Auctioning tends to be the better of the two since, that way, the seller has the most control. The price can only go higher than the value that they think is sufficient. This, however, only applies to units that people will be worth competing over. If the defaulter’s unit does not seem to gain that much attention, it’s going to go unsold for many auctions, sometimes even forcing the company to lower the starting price. Directly reselling the unit has the same problem.
Either way, one defaulted application means just another unit that needs to be transported, marketed, and processed before the company gets any actual revenue – and all these are happening while the unit undergoes;
Depreciation
As you may already know, cars depreciate at about 10% of their fair market value each year. This remains true even if the car is not being used and is only stocked up in a parking space somewhere waiting to be repurchased. Any additional mileage that will be incurred during transportation will only add up to its mechanical wear and tear and thus will only worsen the depreciation rate. Oh and of course, there is the occasional mishandling that will result in a few dents and scratches. Inevitable if you are processing hundreds of cars each month. They can’t sell damaged cars so the units will have to be repaired.
In a Nutshell
You see now that the car being taken instead of the loan being paid by the borrower is not really a favorable situation for the two parties. The borrower loses an asset and their credit history gets a not-so-pleasing remark and the financing company will have to spend cash and a lot of their precious time trying to regain the money that they loaned the defaulter. Resources that would have been better spent on some other more profitable operations, all the while the unit that they were able to acquire is steadily losing value. So yes, the company would much rather that you just pay them the loan at the comfort of your home.
If you are hesitating to apply for Sangla ORCR now because of the fear of your car being taken away, OR if you have already applied and your current monthly amortization is becoming a bit of a burden, just know that most of these companies would prefer that you request for restructuring/refinancing your loan. It’s quicker and it would not require much on their end aside from recomputing, waiting for your monthly payment and updating your account.