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Small loan companies are persons or companies engaged in the making loans to New Mexico residents in the amount of up to five-hundred dollars (5-thousand) or so. These companies specialize in providing various types of small-dollar commercial loans to businesses in New Mexico. These loan companies can also be called cash advance lenders.
Commercial loans with small loan companies in New Mexico are extended to borrowers who will use these loans for purposes such as purchase of real estate, payment of invoices, the education of their children, clearing the mortgage debt, and building a home. There are some small loan companies that provide both personal and business loans to their borrowers. These companies extend loans on the basis of future income. The future income means the income expected in a definite period of time. It is not necessary to submit proof of future income as such.
There are many types of commercial loans offered by small loan companies in New Mexico. Some of these include new Mexico apartment loans, Mexico mortgage refinance, Mexico car loan, new Mexico renovation, Mexico tenant debt consolidation, business plan review, business plan execution, and business startup. Each of these commercial loans has various features, terms, conditions, and cost. One of the most important aspects of all these loan products is that they have a low interest rate.
In order to facilitate competitive loan sales, small loan companies follow certain strategies. The first of which is to take advantage of all consumer protections available in the state of New Mexico. Consumer protection laws protect the rights of borrowers to obtain affordable loans. These laws require new Mexico borrowers to obtain the same level of protection as homeowners when purchasing residential property.
According to the Consumer Credit Act of 2021, new or small borrowers in New Mexico are required to obtain an annual report on credit and financial status. The Annual Report provides important information on borrower's credit history, current income and debts, number of credit accounts, amount of outstanding credit balances, and recent (last five years) credit activity. Among the important data obtained from the Annual Report is the consumer's score. The score is based on the details provided by the consumer in the Annual Report. The Consumer Credit Act also requires banks and other financial institutions to provide free credit reports to all consumers at least once each year. Although the law does not require banks to send the reports, many do; therefore, the Annual report is sent to all prospective lenders.
The second strategy adopted by the majority of small loan companies is to offer special financing programs that do not require application from borrowers. These programs enable borrowers to apply for loans for which they may not be qualified. Most borrowers do not realize that in order to qualify for such financing programs, they must have enough available credit on their credit cards or lines of credit, in order to be eligible for the program. Such financing programs are designed to help borrowers who are unable to obtain traditional loans from a bank or other financial institution.
Small loan companies also tend to charge higher interest rates and fees compared to larger companies. This is due to the increased risk involved in financing to small business. Since the risk is increased, small finance companies can charge higher interest rate and fees to cover their increased risk exposure. As a result of high interest and fee charged by smaller companies, many consumers end up paying more for their small loan amount.
Small loan companies also tend to follow the practice of locking borrowers into long-term contracts. This practice is commonly known as Durkin contracting. Durkin contracting was pioneered in the early 1950s by federally reserve banks to keep consumer loans more stable during the height of the Great Depression. Although this contracting practice has been condemned by legal experts as being illegal and therefore violates the Fair Debt Collection Practices Act (FDCPA), many consumer finance companies still use it today. Because of this practice, borrowers should exercise extreme caution when considering any proposal from any company associated with the Federal Reserve.