FRAUDCREDITBUDGETING

Avoiding Auto Loan Refinance Scams

Paying on an auto loan with a high interest rate can leave you feeling stuck. Payments seem to make little difference in your balance while, in some cases, the value depreciates faster than you can pay back the loan. Receiving mailers and offers from companies promising to reduce rates and car notes leave many of us in these situations hopeful, believing there’s a way out. However, before you jump at their offer, remember to proceed with caution. Continue reading to learn how to spot, avoid, and blow the whistle on auto loan refinance scammers.

Spotting the scam

Learning how these scams work is essential to recognizing them. In some cases, supposed refinancers demand funds from you before they can deliver you a lower interest rate or payment. Usually, this initial sum is referred to as an “enrollment fee” and may cost you hundreds of dollars. Other scammers instruct you to halt payments to your current loan servicer and instead send your typical monthly amount to them. This is all done under the guise that payments are being negotiated with your current lender while, in fact, the faux refinancer has no intention of lowering payments. Instead, they pocket your money and might even increase your payments insisting it will allow them to continue working on their negotiations.

The hard truth of these scams is that payments have not been made to your vehicle loan. Oftentimes damage has been done to your credit, late fees have accrued, and your original loan servicer could be seeking to repossess your car. If it gets to that point, the lender seizes the vehicle, sells it for what they can, and applies the sale amount toward the balance. You are then responsible for the remaining amount left unpaid on the loan, or what’s called the deficiency balance, and now have no vehicle. The damage to your credit score and repossession statement showing on your credit report can make financing a vehicle expensive or near impossible, making it worthwhile to conduct research to avoid these scams in the first place.

Avoiding the scam

Before doing any business with an auto loan refinance company, do your research. Conduct an online search of the organization alongside key words like “review,” “scam,” and “complaint.” This will allow you to learn what others have to say about their experiences working with the company before entering into an agreement. You can also check with the Better Business Bureau (BBB) or your state attorney general’s office to uncover further information.

All of this takes time but it’s worth it! Don’t rush into anything based on promises or guarantees to lower payments; they are a scam. There are no special relationships with loan servicers, limited-time deals, or money-back guarantees. Be skeptical and consider discussing your findings with someone you trust before signing any contracts.

Reporting the Scam

If you believe you’ve been a victim of an auto loan refinance scam, consider taking the following steps to increase awareness and protect others.

File a report with the Federal Trade Commission (FTC) at ftc.gov Submit a complaint with your state attorney general’s office or consumer protection agency Report it to your loan servicer or financial institution so they can inform others

Sources:

• https://consumer.ftc.gov/articles/auto-loan-refinancing-scams#How
• https://www.bankrate.com/loans/auto-loans/how-to-detect-a-car-loan-modification-scam/
• https://www.carchex.com/research-center/auto-finance/how-to-spot-car-refinancing-scams/