Recently, auto loan fraud has been rampant in most states, causing car owners to lose their money and vehicles. Just as technology continues to grow, fraudulent activities also grow. Car owners who are desperate and vulnerable are the main targets for auto loan fraud because they tend to fall victim easily. Because of this, borrowers need to be vigilant and know how to spot auto loan fraud. Auto loan frauds are the extorsion of borrowers who require loans to meet their financial needs.
Before getting an auto loan online, you need to consider some factors to know whether or not it is legit. Every car loan lender may seem legit, but it makes more sense to identify which lender is legit and which is not. However, before opting for an auto loan online, read through this write-up for insights and steps on how to spot auto loan fraud.
How to Spot Auto Loan Fraud
Due to the high rise of these criminal activities, car owners need to be able to spot auto loan fraud to avoid getting scammed. However, in this section of my write-up, the steps on how to spot auto loan fraud are stated. Before applying for an auto loan, especially online, you need to be aware of:
Auto Loan Qualification Scams
Auto loan modification scams are one of the common scams car owners often fall victim to. These scammers promise to lessen your car loan payments for a certain sum of money. They ask borrowers to pay beforehand, or they require them to make an unusual payment. Also, scammers do not take a credit check before offering a loan, and most times they pressure borrowers to sign the contract immediately without letting them review their decision.
Using an auto loan modification scam, the scammer will make negotiations for you and ask you to make car payments before you get a lender. However, legit lenders do not do all of these; instead, they require a credit check before approving a loan. They do not require upfront payments, and they do not pressure borrowers; instead, they allow them to review their decisions as well as other information. Ensure you negotiate loan times with your auto insurance company’s customer service team directly to avoid this scam.
YO-YO Financing Scams
Using this scam, a scammer will cause you to believe the car financing is complete. This scam may accept your trade-in down payments before letting you go. After days or weeks, the scammer will then call you back and inform you that the car financing did fall through, and to maintain possession of your vehicle, you need to sign a new contract with less favorable loan terms. Most times, the scammer must have sold out the trade-in vehicle, making you choose between getting higher interest rates or with no car. Car owners with bad or no credit are often targets of this fraud. However, in every state, this type of financing is illegal.
Negative Equity Scams
This scam, also called upside-down on your car loan, is a type of auto loan scam where a borrower owes more than the car’s worth. These scammers do not intelligibly explain to borrowers that the negative equity is taken and added to their new car loan balance, even though they are offered to pay off the loan balance, which is due on a trade-in. Most times, borrowers complain that they do not know this information until after the new auto loan has been signed. To avoid this, it is important to review the paperwork before signing.
Loan Packing
Scammers may apply pressure when convincing borrowers to buy additional products and services when they purchase a new car. These additional products or services include:
- Gap insurance.
- Tire service and rotation contract.
- Extended warranty.
- Rustproofing.
While some of these products and services are helpful, most of them are not. The scammer’s main goal is for you to spend more money. Under no situation should you agree to additional services through pressure. However, if any of these services interest you, you should negotiate the price with the lender for the added item. Keep in mind that these products and services are added to the loan, and you are required to pay interest for them. To avoid complications, ensure you review the contract properly before signing.