There are several factors that affect the settlement of a loan. Regardless of the amount of the loan, the term of repayment is a crucial element. There are loans that are payable in a single lump sum at once. One good example is a payday loan that matures after 15 days or 30 days at most. Other loans, like traditional bank loans, are on installment basis. However, there are also payday loans that can be negotiated for a longer period under installments. The conditions depend on the policies of payday loan lenders, which generally consist of collaterals other than the paycheck of the borrowing applicant. To make installment loans more attractive, a no Telecheck is offered to entice customers. Will it really make a difference if no Telecheck is taken off? Let’s discuss it below.
What is a Telecheck?
The mechanics of Telecheck is quite similar to credit score check performed by big lending companies or to Teletrack check providing analysis of individual’s credit history. As far as Telecheck is considered, it verifies entries made on a check of a certain customer. Using its database, Telecheck shows the probability of the check’s funding and other useful information, which include fraud if relevant to the check under verification. Its opinion is mostly based on the check writing history of the customer as sourced by Telecheck from previous transactions compiled on its database.
The operation of the Telecheck is lawful as it falls under the Fair Credit Reporting Act and is classified as a credit bureau. It also operates as a collection agency which is allowed under Fair Debt Collection Practices Act. Although Telecheck is professionally qualified on this field, its reports are not compulsory to be followed by payday lenders. However, in most cases, lenders use them to decide whether or not to accept postdated checks from their borrowers as securities on their installment loans.
If the loan you managed to have approved by the lender is payable by a series of installments, there is a big possibility that postdated checks are required. There are lenders who are stricter and prefer to submit the check to a Telecheck for verification. However, there are lenders who are more willing to take the risk without the services of the Telecheck. They believe that what they should go after is added security of the loan they extended. And what are these other guarantees that assure of repayment when an installment falls due?
Installment loans are a little bit problematic than short term loans when it comes to collection. The financial stability of the borrower is always at risk considering the factors he is exposed to. Normally, lenders of installment loans require their borrowers to put up other properties to serve as collateral of the installment loans. The loan document will include a provision that in case of default on the part of the borrower, the lender will be vested with the right over the property offered as collateral to be sold. The money from the sale of property will be applied to the principal loan amount. This is a guarantee that the lender will heavily consider before releasing the installment loan. This is on top of the postdated checks that are required to cover every installment amount.
Lastly, the postdated checks are also documents in the hands of the lender. He can enforce collection using these checks if they bounced for whatever reason. The courts are his other recourse to collect, although at a cost.