Many people who need a car loan but with bad credit turn to dealers to acquire financing. True, you can get a bad credit car loan from a trusted dealer but it's important to remember that there also dishonest car dealers who may take advantage of your situation. In this article, let's discuss the most common car loan scams that consumers need to be aware of.
Car Dealer Financing - Not a Loan?
In most cases, car dealers do not directly offer the loan. Instead, they offer a deal with the consumer using a Retail Instalment Sales Contract. This contract will then be presented to a bank or a lending company who will be providing the funding. Once approved, the car dealer may also charge their own interest rate which can make the "financing" a lot more expensive.
This is why consumers are warned to look out for dealers that offer car loan financing with high rates and fees. Always remember that no matter how low your credit score is, you still deserve to be treated with all dignity and fairness.
"You did not qualify for a low APR." Some car dealers may attract customers with the promise of a low APR plus quick processing and approval. You may even get to drive home your new car on the same day. However, one or two weeks later, you may receive a call from your dealer informing you that you have been denied the low rate because of your bad credit.
Many people have put up with this scheme because they believed the dealer. The truth is, your dealer already knows the real APR the day you sign up the contract. To avoid such scam, avoid car dealers who force you into signing up the loan contract in a hurry or who promise you the lowest rate despite your poor credit score.
All you need is a co-signer. Some car dealers may convince you to get someone who will co-sign the loan for you so you can get approved quickly and get good rates. While this may seem believable, some scammers will process the loan using your co-signer as the Primary loan holder. Thus, no matter how timely you are in submitting your payments, your credit score will not improve because the account is actually not in your name.
