Unscrupulous lenders are notorious in the auto lending industry. Hundreds of car buyers become victims of auto financing scams in a year. Portland is certainly not an exemption. Let us help you be familiar with some of the common tricks abusive auto lenders pull on their victims.
The Credit Score Lie
Never walk into a lender’s office without bringing with you a copy of your credit report. Otherwise, the following may happen:
The representative of the lending company welcomes you and sees that you haven’t requested for a copy of your credit report yet. He offers to get it for you. He comes back and shows you your score—a very low figure.
The truth is the lender exaggerates your score to make it seem worse. That way, they could mark up the interest rate, charging you a higher one than what you really deserve.
How to avoid this? Make sure you have reviewed your credit report and purchase your credit score before visiting a lender’s office. The lender can’t pull this trick on you if they see that you know your credit standing well.
This may not be new to old-timers but for first-time car buyers, better pay attention. Yo-yo financing is one of the most common auto loan scams that target people with bad credit.
What happens in yo-yo financing is the dealership lets you drive the car home after asking you to sign some papers. This seems to finalize the deal. However, they would call you after a week or two to tell you that the financing fell through. That means you are not approved for an auto loan, which they promised they would get for you.
If you want to keep the car, you would have to go back to the dealership to renegotiate everything. Otherwise, they may repossess the car. If you renegotiate, the interest rate will be higher.
The truth? The dealer is most likely to know, as soon as they see your credit standing, whether you will be approved for financing. That means they can already tell before you can even sign any paper.
To avoid being a victim of this scam, never leave the dealership with the car unless financing is final. Read the contract thoroughly before signing it.
The Cosigner Scam
It is advisable for people with bad credit to get a cosigner when they apply for an auto loan. A cosigner, who must have good credit, can help them get approved easily.
However, some lenders take advantage of this. They tell their bad-credit borrowers that a cosigner is required in order for them to get approved. If you are a borrower who badly needs an auto loan, you would probably try your best to convince someone to be your cosigner. However, the lender would put the entire loan into your cosigner’s name, making him or her the primary borrower instead of you.
When you sign a loan contract with a cosigner, make sure both of you sign in the same room at the same time and day. That’s how it is done legitimately.
Dealer markups are controversial because a lot of dealers have been found to be abusive in marking up their financing rates and the prices of their add-on products and services. Dealers earn extra money through markups. But without legal caps and with lack of regulation, dealers tend to abuse this right.
You can always negotiate for lower rates but you can avoid being overcharged unknowingly by comparing several auto loan quotes and making some computations. In addition, you can negotiate out some extras you don’t need. Extras are never compulsory.