Canadian Bad Credit Auto Loans Scams & Tricks To Look Out For
Bad credit can be a huge roadblock to getting approved for an auto loan. If you have bad credit you are not alone. One-third of Canadians have bad credit.
Having bad credit or no credit can make a buyer feel like there are no options left to obtain a reliable car. The truth is that landing an auto loan is challenging if you have bad credit; it’s not impossible, but there are major points that buyers should be aware of prior to applying for loans. Too often, buyers risk falling into auto loan scams that can cost thousands of extra dollars. Read on to find out how to identify scams and how to avoid being taken advantage of, plus learn how to apply for an auto loans and how to research your credit score if you are a resident of Canada.
Getting approved for a good auto loan can help you not only get a reliable car, but the car that fits your lifestyle.
How to Spot a Scam
Loans are a product that lenders offer to help you pay for the car of your dreams. Not all loans are created equal. The total price of the car, terms and conditions of the loan, along with interest rate and length of the loan, are all extremely important factors to consider when navigating the financing process and selecting a loan that fits your lifestyle.
Be aware of what your monthly payment should be for the car that you want, but don’t select a car based solely off of the monthly payment. Calculate the total cost of the car, your down payment, and your interest rate. Higher-interest rates or hidden fees subtly roll into monthly payments, and under that disguise, many buyers are unaware of the extra money that they are actually spending. Auto loan scams can cost buyers more money across a longer length of time because most vehicle shoppers look at the average monthly payments, versus calculating the actual price of the vehicle.
Loans that require a co-signer can also raise a potential red flag. For people with bad credit or no credit, a co-signer may be required by the bank before a car loan can be obtained. Unfortunately, some auto loan lenders might tell you that they can’t approve you for your loan without a co-signer. Be aware of the legitimacy of the request for a co-signer. Although having a co-signer seems like a smart option for getting a sensible car and for building credit, it may become more of a headache and hassle than you anticipate. The problem occurs when the lender puts the entire loan under the co-signer’s name, leaving you with car payments and no credit building activity to your name. You may even have insurance issues, or have to pay more to add a second driver to your insurance for financing purposes since your co-signer is technically signed to your auto loan. If you absolutely have to have a co-signer on your auto loan, be sure that both names are on all documents for the car, or you incur a huge risk.
What to Look out for… Signs it’s a Bad Loan
There are tricks that loan companies and dealerships will use to make a maximum profit from your interest rates. Never sign a contract without reading through all of the terms and conditions. Also, be sure to evaluate how your loan payment will fit with your monthly budget and lifestyle.
Affording the car that you want is possible, but be aware of bad credit auto loan scams that can set you apart from your financial goals. Be on the lookout for these bad credit car loan scams in [cf_geo return=”state” default=”Your State”].
Beware of Low APR Car Financing
Car manufacturers will advertise low or no APR rates. The truth is that not everyone will qualify for these special rates, in particular, those with no credit or bad credit. If your credit is poor, then you probably will not qualify for the enticing rate that is being advertised. It’s best to do your research before you invest time in applying for a loan with low or no APR rate. If it sounds too good to be true, it may just be. Click here to see bad credit loans that you may qualify for.
Look out for Loan Markups
One of the simplest scams that lenders try to pull is offering interest rates that profit the lender more than the borrower. In other words, they want to offer you the loan that makes them the most money. This trick works most frequently with inexperienced buyers and those who have not researched their credit history before entering into the dealership. Lenders know this and often offer you interest rates that are much higher than what you actually qualify for. Even something as small as a 2% hike can compound over time.
Knowing what interest rate you should pay before you apply for your loan saves you time and hassle with your lender. Note that dealers and lenders are not obligated to offer you the best rate possible. This means that they can offer you a rate that secures them healthy gains. They may opt to offer you a mid-range or even high-interest rate loan so that they can profit the most from your payments. Combine those high interest rates with long, lease terms and you can definitely expect to pay more than you budgeted for.
Be on Alert for Packed Payments
Another one of the most common car financing scams are Packed Payments, which are monthly car payments that have extra products or services like extended warranties and GAP insurance rolled into the monthly cost. While you may not notice the cost upfront, the difference in price across the length of your loan term can cost you thousands of extra dollars. Read through the terms of your loan, you may find unnecessary hidden costs that you didn’t bargain for. Think of it this way, an extra $36 per month doesn’t seem like much tacked onto your car payment, but over the course of a 60-month loan it will cost you an extra $2,100!
Another sneaky way that dealers squeeze more out of bad credit auto loans is by altering the terms of the loan after you’ve been told you’ve been approved. Many times this happens after you’ve purchased the car and driven off the lot.
After you’ve been told that you are approved to get the loan, the lender or car dealer will call to tell you that you actually were not approved for the loan. They will then offer you another loan, but with a catch, it is a loan with a higher interest rate. Desperate to keep the perfect car that you’ve found or even driven off the lot with, you may settle for the higher interest terms of the newly offered loan and the lenders make more money off the loan. Lenders know that you will likely not return the car and that you will probably agree to the terms.
Bad Credit Score Lie
Yes, as bad as it sounds, a lender could actually lie to you about your actual credit score to take advantage of you and sell you a loan with a higher interest and more rigid terms. While this is not an honest practice, nor common, it can happen. Taking an active stance to research your credit score and options can keep you protected from dishonest practices such as this. A few minutes of online research is all that you need to view your credit history and score.
Why Buyers with Bad Credit Get Taken Advantage of
Lenders prey on vulnerable or inexperienced buyers who haven’t had historical experience with the loan application process. Bad credit doesn’t mean that you have to settle for sky-high interest rates and unfair terms and conditions. While you can expect to pay a higher than normal interest rate if your credit is bad, you don’t have to settle for scams and tricks just to drive a reliable car.
One big reason that buyers fall for loan scams is that they don’t know what financing options are available to them based on their credit history. If you enter into the dealership without this information, it is much easier to rely on the resources supplied by the dealership and fall into bad credit auto loan tricks.
Another major reason that buyers fall into dealer tricks is because they feel they have limited options for financing their car loan. Bad credit can make buyers feel like they have to accept the first auto loan made available to them. Depending on your credit history, there may be more options available to you. You can click here to see the loans you qualify for.
Another big reason that many people fall victim to bad credit auto loan scams is that they are unaware of their credit history before stepping foot into the dealership. Check your credit score so that you know the interest rate that you should be paying. You can check your credit report and score quickly and easily online by visiting Equifax or Transunion.
Applying for financing without knowing your credit score is one of the biggest and most costly mistakes that a car buyer can make. Once you have your credit score and history you can calculate the appropriate interest rate that you should pay. Armed with this knowledge, you can match your numbers against the numbers that your lender gives you, allowing you to spot packing scams and other tricks that dealerships use to squeeze more money out of your loan payments.
Failure to prepare research is a major reason that buyers fall victim to loan scams. Lenders prey on inexperienced or frantic buyers who simply want to make their purchase based on limited knowledge of the financing process. Far too often, people with bad credit feel like they have limited options and feel pressure to immediately accept the loan that is offered to them. With good preparation, you can afford to finance the car that you want, and maybe even save money over time. Click here to instantly see which auto loans you may qualify for.
Lastly, new buyers or buyers with limited financing options, often tend to focus on monthly payments instead of the total vehicle price. A focus on monthly payment can cost more over the length of your loan time as buyer fees, tax and title fees, and interest rates are calculated into the final price of the car. You may end up paying less upfront and more in the long term.
How to Avoid Falling Victim to a Scam
Far too often, people fall victim to bad credit auto loan scams because they feel insecure or helpless about their credit history. Take your time to do your research before you go in to buy your car. While you may be offered higher interest loans, there are certain factors to take into consideration when you are selecting a loan. If you feel uncomfortable with the loan that you are being offered, take time to look over all the terms and ask your lender questions.
Absolutely avoid locking in high interest rates for a long loan term if possible. The unfortunate reality is that those with lower credit scores often pay a higher interest rate on their auto loans. One great way to dodge the mounting costs of high interest rates is to lock in a shorter-term loan. While you may pay more on your monthly car payments, you pay off your car note quicker and will spend less in interest fees over time. Plus, paying your car note on time regularly each month can help repair your credit so that you will qualify for lower interest loans once it’s time to trade out your ride for something newer. If you chose a 60 or 72 month loan, your monthly payments may feel less expensive upfront, but you might end up paying more for your car and for a longer period of time.
Don’t fall for advertised rates. If you have bad credit, chances are that you won’t qualify for the 0% financing that is often advertised. Click here to calculate your car payments.
Of course, a great way to avoid paying sky-high interest rates is to work on building your credit as quickly as possible. Re-establish your credit, so that you can qualify for a lower interest rate to finance your next vehicle.
What Do You Need to Qualify for a Loan
Bad credit happens to good people, but it shouldn’t stop you from driving a reliable car. In fact, the car of your dreams may be just a few simple steps away. Did you know that you only need to meet three criteria in order to apply for a bad credit car loan?
Think your credit history has doomed you from qualifying for the car you want? You can apply to be accepted for an auto loan if you meet just three simple criteria:
- You possess a valid driver’s license
- Are able to obtain car insurance
- Make at least $1,800 per month in income
If you meet these three criteria for acceptance, you can drive away in the car of your dreams!
How to Get Your Credit Report and Clean Up Your Credit Score
Don’t let bad credit or no credit make approval for an auto loan feel unattainable. Take time to learn about your credit history so that you can pick the loan and car that fits your lifestyle and financial goals.
Remember that auto loans are another product that lenders offer as a means of profiting from you. It’s important to be savvy and never rush into a loan agreement without preparation. Do your research before you go in to make your purchase, and don’t feel pressured into a bad loan just because you feel there are limited options. You may be surprised at which loans you can qualify for even with your credit history. Getting approved for the car you want can be an easy process. Click here to see the auto loans that you qualify for.
In summary, lenders capitalize on buyers with bad credit or no credit. Lenders often offer enticing packages that have hidden costs that leave you with more hassle and paying more over time. You may not even realize that the loan that you are accepting is a scam! Use these tips to access your credit score and rebuild your credit:
- Keep in mind that you can access and print your credit report and score online by visiting Equifax or Transunion.
- Keep a signed contract of your loan so that you have all details of your agreement.
- Never skip a payment. If you have bad credit already, then chances are you understand how one missed payment can affect you. If you can’t make your monthly payment, work with your lender to make a payment arrangement.
- Find ways to rebuild your credit like paying down credit card bills, closing old lines of credit, and removing old addresses and errors off of your credit report.
- Pay off high interest credit cards before you apply for an auto loan.
All in all, you can position yourself to drive the car that you want by taking a proactive approach in the bad credit auto loan application process. Arm yourself with knowledge of good practices and be aware of bad practices that can be costly to you. Remember, your credit score doesn’t mean that you can’t afford to drive the car that you need. Take time to prepare and most of all, use these tips to enjoy your car buying experience.
If you take these tips seriously and apply them, you will be able to purchase the car that you want without worrying about your credit score or even down payment. The entire auto loan application process will be fairly simple and fast. You just have the choose the right auto financing company that can help you buy the car of your dreams without giving you too much hassle.
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