If you’re like me, the idea of shopping for a car might make you feel a little nauseous. For many years I hated car shopping. I always felt clueless during the entire process. Until I learned that educating myself on the process gave me power. Unfortunately, over the last few weeks, I have had several clients come to me with issues with what appear to be predatory auto loans.
What is a predatory auto loan?
It is a auto loan that is unfair or abusive. Meaning the consumer may be purchasing a vehicle that is not worth the amount being financed or the interest rate may be excessively high.
Why are predatory auto loans a problem?
Predatory lenders target older adults, low income individuals, and those with limited education. The actions of the predatory lender may not be illegal, but they could leave a vulnerable individual with ruined credit, unmanageable debt, or worse.
How do I spot predatory auto lending?
Pay attention to the interest rate and what fees and charges are included in the paperwork. Question excessively high interest rates and fees. Refuse to agree to terms you cannot afford. if the seller is rushing you to sign papers, ask to come back when the seller has time for you. Avoid lenders that state they can approve your loan regardless of credit history.
How can I get an auto loan with bad credit?
First, know your credit score before you start shopping for a vehicle. Repairing your credit score before you start shopping could save you money. Next, do your research. Understand what key terms such as annual percentage rate (APR) mean. Research the car you would like to purchase and learn how much the car is worth and how much you should pay. Then, shop around. Visit several auto dealers and see what lenders they work with. You can also check with your bank to see if they will finance your loan. Lastly, do not shop monthly payments. Shop loan terms. A lower monthly payment might look good on paper, but you could end up paying more than what the vehicle is worth over the life of the loan.
It can be hard to get an auto loan when you have bad credit. However, by being prepared and doing research ahead of time you could find a loan with a low rate. Once you find the loan that is right for you make timely payments each month to boost your credit score.