Wednesday, June 13, 2012

First Car Loan? How to Avoid Being Scammed

Getting your first car loan can be an exciting time in your life. The thrill of owning your first car is often an exhilarating experience. Knowing that something is all yours has a certain appeal. It is this excitement that often leads us into poor decisions when it comes to auto loans. In fact, you might be getting scammed and not even realize it. Here are a few ways to avoid being scammed on your first auto loan.

Extra Requirements
If you have no credit or questionable credit, shady car dealers love to pull this trick. They will go back and check your credit file. Then they will emerge and say that the bank is requiring that you get the extended warranty or some other type of add on. They make it sound like it makes them feel better about giving you the loan. In reality, they are just lying so that they can bump up the total sale a little bit and make more commission. Do not believe anyone that tells you this and tell them that you want what you agreed upon. Be prepared by equipping yourself with a copy of your credit report and do not let anyone persuade you that it is any different than what you have in front of you.
Not Paying Off Trade-In
While this is highly unethical, some shady car dealers still try it. When you go into the dealership to look at a car, they immediately want to know what you have to trade-in. Once you work out a deal for the car, they take the trade in and the responsibility to pay off the loan for you. However, sometimes they fail to pay off the loan for you. Then you have a car loan that no one is paying for and you no longer have your car. Then after a month or two, you get a phone call from your original lender and they want to know where their money is. This can really hurt your credit and get you in a legal battle with your new car dealership. Watch out for this common auto scam and protect yourself with legal documents securing the responsibility to the lender.
Co-signer Scam
Another common trick is getting a co-signer involved once you are rejected. If your credit is so bad that you are rejected for an auto loan, they suggest that you find someone to co-sign the loan for you. You call up your parents or someone else to co-sign with you and they come down to the dealership. However, when you get them down to the dealership, the dealer makes them the buyer of the car.
They might have you both sign some paperwork, but you later find out that your name is nowhere on the loan or the title. Your co-signer unwittingly agreed to purchase a car and they also took on all of the risk. You now have to make your payments every month in order to protect their credit. All of the risk was shifted from you to your friend without anyone knowing about it.
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