It is often said that if something is too good to be true, it probably is. This is true in the auto lending business. A lot of rip-off artists and fraudsters have multiplied across the country. What’s worse is these guys often target people with less-than-perfect credit. You don’t have to be a victim. Learn how to avoid being scammed while trying to get financing for the car that you need.
#1: Have your own copy of your credit report.
Getting a copy of your credit report before applying for an auto loan is an effective way to avoid scams. If you have bad credit, you are more vulnerable to the credit score lie. In this trick, a lender or dealer volunteers to get your credit report for you. He’ll come back and announce a 3-digit figure claiming that it’s your score. But that number is an exaggerated version of your already low credit score. Fraudsters do this so they can charge you a higher interest rate.
With your credit report in hand before you visit a dealership or a lending company, you protect yourself from being lied to about your credit score. Be well familiar with your credit.
#2: Shop multiple lenders.
A low interest rate for bad-credit borrowers is a really nice offer, and often tempting. But don’t be too sure that you’ll get what they promise. Before settling with an offer, look at other offers from at least 2 different lenders. Are they charging the same rate? If not, how come the first lender can charge an unbelievably low rate? Making some comparisons can help you identify the best offer. And remember that the best offer does not necessarily have the lowest rate. In addition, work only with reputable lenders.
#3: Do some math yourself.
Whether you like it or not, you have to do some math in order to avoid bad credit auto loan scams. An auto loan calculator is a great tool that can make the math easier. Use it when comparing auto loan quotes and setting your budget. It can compute estimates for monthly payments, car affordability, ownership costs, total loan amount paid at the end of the term, and the like. By doing some math yourself, unscrupulous lenders won’t be able to fool you by performing some magic on the numbers. You can avoid being overcharged.
#4: Know what’s against you.
You may not be a fan of research but, believe it or not, it can get you through the process of taking out an auto loan without being scammed. One effective way of avoiding scams is knowing what they are and how they are done. It’s smart to know what’s against you. Read a lot about the various ploys of unscrupulous and abusive lenders and dealers and learn how to avoid them. Reading this guide is actually a good start.
#5: Ask questions.
One technique—and red flag as identified by Boston College—used by scammers in pulling off their ploys is making things complex for the borrower. But the problem with many car buyers is they don’t bother clarifying things anymore when they are too excited to finish the paperwork and drive the car home. Others are naïve and easily accept the limited, and sometimes deceiving, information given them.
Unscrupulous lenders would try to hide things from you. If there is any part of the negotiation that is not very clear to you, don’t hesitate to raise your concern before signing the loan contract. Ask the lender questions especially when you think they’re not giving you everything you need to know.