Are you having trouble paying your car loan and thinking about doing business with a company that promises to get you a loan with lower monthly payments? Not all refinancing companies play by the rules. Scammers will take your money and do nothing in return. Learn how to recognize, avoid and report auto loan refinancing scams.
How the scam works
Scam refinancers promise they’ll get you lower payments on your auto loan but insist you pay them first. They may call the advance payment an enrollment fee or something similar. The fee will likely be several hundred dollars.
Scam refinancers often tell you to stop making car payments while they negotiate a deal with your lender. Often, they tell you to make your loan payments directly to them and say they’ll pay your lender for you. In time, they might also tell you they need more money from you to supposedly keep working on your case.
In reality, scam refinancers aren’t negotiating with your lender or anyone else. If you make your monthly car payments to the refinancer instead of your lender, those payments will likely go straight into the scammer’s pockets – not to repay your loan. You may only find out about the fraud when your lender contacts you about missed payments, or your car is repossessed.
What scammers tell you
Auto refinancing scammers will say just about anything to get your money:
No one can guarantee they’ll lower your payments. If you hear claims like these, move on. They’re the telltale claims of auto refinancing scammers.
What to do if you can’t afford your payments
If you’re having trouble making car payments, contact your lender as soon as possible. Tell your lender about your current situation and ask about your options, including possibly:
Auto loan modification
Auto loan modification usually involves pushing missed payments to the end of the loan or extending the loan term – say, from 60 months to 72 months. A modification can give you some breathing room now but can increase the amount you pay in interest and other charges over the life of the loan, even with a lower interest rate. Lenders rarely lower the total amount you owe for the vehicle in a loan modification.
Returning the vehicle
In some cases, your lender may offer to take the vehicle back and forgive the loan. Be sure to get a written statement from the lender saying returning the vehicle fully satisfies your loan. If not, the lender might still claim in court you owe money on the loan or owe a deficiency balance, which is the difference between what your car sells for and how much you still owe on it.
Don’t try to avoid the problem by doing nothing. Even if you have to miss a payment, don’t be afraid to talk with your lender to learn about your options. The longer you wait, the fewer options you’ll have. And, if you miss payments, you could be charged a lot more in fees and hurt your credit. Your lender could also repossess your car – sometimes without warning.
What to know about repossessions
States have their own rules about how cars can be repossessed and what happens after. If lenders break the rules, they might lose other rights against you or have to pay you damages. Check with your state attorney general or consumer protection agency to learn what rights you have in your state. You might have options to buy back the car or get any personal property left inside it.
You also might still owe money after the car is repossessed. You could be on the hook for any difference between what your lender gets for selling the car and what you still owe on it, plus any fees related to the repossession. In most states, your lender can sue you for the difference, or deficiency. An attorney can tell you if you have grounds to dispute a deficiency judgment.
Avoiding auto loan refinancing scams
Before signing up with an auto loan refinancing company, take these steps to help avoid scammers:
Report a problem
If you have a bad experience refinancing an auto loan, report it to the FTC at ReportFraud.ftc.gov and to your state attorney general or consumer protection agency.