Now that scam artists are being run out of the mortgage industry, they’ve turned their attention to car loans, according to this MarketWatch report.
Financially strapped consumers blown over by super-high car payments are turned on by companies that advertise refinance options that will drop the payments by hundreds of dollars. While it is of course possible to refinance a vehicle, consumers need to be as cautious about these companies as they would with others touting themselves as instant credit-fixers, said the Better Business Bureau.
“Some companies may make it look like they are tossing out a life preserver, but they end up pulling many borrowers deeper underwater,” Steve Bernas, chief executive of the Better Business Bureau that serves Chicago and northern Illinois, told MarketWatch.
Rosemary Shahan, president of Consumers for Auto Reliability and Safety, or CARS, a non-profit auto-safety and consumer-advocacy group, advises consumers interested in refinancing car loans to consider a credit union, groups such as CARS, the Consumer Federation of America or the National Foundation of Credit Counseling.
Other tips provided on MarketWatch include:
- Talk to your lender. The Better Business Bureau said lenders are often eager to work out a more convenient payment plan that might mean stretching payments out over a longer period of time. Few lenders want to be left holding a bad loan and a repossessed car.
- Join a credit union. For the $5 or so membership fee you can have your credit union review the loan and offer advice.
- Do the research. If you think an auto-loan modification company is the way to go, check it out before you write that first check. The Better Business Bureau has “reliability reports” that will tell you how many complaints have been filed, what the nature of those complaints is, and if there are any government actions or lawsuits against the business, among other things.
- Beware of advance fees. Even if there’s a money-back guarantee, don’t take that at face value if the company demands a large up-front fee. Many states — Illinois included — don’t allow companies to charge customers in advance for any financial services.
- Get it in writing. Have the company disclose the services they’re performing, how much it will cost, terms for refunds and money-back guarantees.
- Consider selling the car. Used-car prices are high right now because the cash-for-clunkers program took so many vehicles off the market. You might be able to take the money and buy a more affordable car.
Have you been a victim of a car refinancing scam? How have you protected yourself? Have you refinanced a car loan recently?