Auto Refinance Scams and How to Avoid Them

With the economy the way it is, a lot of consumers are finding ways to cut down on monthly expenses.  One popular way is by refinancing their auto loans.  Bad credit does make refinancing more difficult, but there are lending institutions who may be able to approve you.  That said, when entering into any kind of contractual obligation such as a loan, you have to be on your toes.

How to get the best deal when it comes to bad credit refinancing:

  • Beware of bad credit lenders who offer you absurdly low interest rates.  You have to remember that lenders are assuming risk when they extend credit — and greater risk when they lend to a person with bad credit — so if the deal looks just too good to be true, there’s a good chance it is.  When rates are significantly lower than current national averages, you’ve got a pretty good clue that the refinancing loan will be adjustable — and when the rate adjusts, you could be in for big problems.
  • Avoid lenders who encourage you to fudge or exaggerate items on your application like monthly income.  Yes, you might receive better terms on your loan, but chances are you probably can’t afford a greater loan amount (not to mention falsifying data is not legal).  Lenders may encourage such practices because they often get paid on a commission basis — the bigger the loan, the bigger their paycheck.
  • NEVER put your signature on any BLANK forms.  Not when applying to refinance your vehicle, not anytime.  No one should ever ask you to sign a blank document — at least not in financial matters.  There are plenty of lenders out there looking for your business — go find a different one if your current lender puts on a blank document in front of you.
  • Take your time.  Don’t sign anything until you’re 100% certain.  Sleep on it if you have to.
  • Watch out for arbitration clauses.  If a contract contains an arbitration clause, you are most likely signing away your rights to legal recourse should you get into a conflict with the lending institution. If you absolutely have to sign the document in question, make certain that the Arbitrator is from a reputable, responsible, accredited association.