Auto Loan Modification Issuesby Steve Cypher on Saturday, April 28th, 2012
Most people, including those financing with bad credit auto loans, depend upon their vehicles to get them where they need to go – especially to and from work. But late car payments can add pressure to this situation and lead some to desperate measures – a situation that fraudsters try to take advantage of.
We are familiar with these situations because here at Auto Credit Express we’ve spent the last ten years helping buyers with poor car credit find a dealer for their best chance at approved auto loans. It’s also a big reason our website contains information on issues such as FICO scores and bankruptcy as well as today’s topic, understanding auto loan modification companies.
Auto loan modifications
There are companies out there that claim they can, for a fee, lower your monthly car payment and help you avoid repossession – something consumers with low credit scores might find particularly necessary given their higher credit risk.
But it turns out that many of these offers are just schemes to take money from these types of buyers – as illustrated by an article from the Federal Trade Commission (FTC), the nation’s consumer protection agency.
Here are some excerpts:
If you’re having trouble paying your car loan and you’re worried about having your vehicle repossessed, you may think that doing business with companies that claim they can reduce your monthly car loan or lease payment can help you avoid repossession. These companies might charge fees of several hundred dollars up front, tout their relationships with consumers’ lenders, and bolster their claims to be able to significantly lower your monthly payments with glowing testimonials from “satisfied” customers. Some say that if they can’t make a deal with your lender, they’ll refund your money.
The promises may sound like a way to get out from under. But the Federal Trade Commission (FTC), the nation’s consumer protection agency, says it’s smooth talk by scam artists who are out to take your money and provide nothing in return. In fact, the FTC recently sued companies that made claims like these, but failed to deliver the auto loan modifications they promised or honor the refund policies they “guaranteed.” What’s more, in many instances, the companies never even contacted any lenders.
The victims of these auto loan modification scams tell the same story: After paying a fee for the promise of a loan modification, nothing was done to secure the results that were promised. The scam artists often compounded the problem by telling their clients to stop making their car payments while the companies claimed to be in negotiations with lenders. Some victims learned that the companies hadn’t done anything only after their lender contacted them about repossessing their vehicle. In some instances, the scam artists demanded additional fees to continue working on their client’s cases.
What you should do
According to the FTC, if you’re having trouble making your car payments you should do the following:
• Contact your lender. Do this directly and as early as possible. The longer you wait the fewer options you’ll have.
• Understand loan modifications. Typical auto loan modifications involve deferring missed payments to the end of the loan or extending the term to reduce the payment amount.
• Understand term extensions. Extending the term can result in higher interest costs even if the interest rate is lower.
• Creditors rarely reduce the interest rate or principal amount. Be aware that an auto loan modification rarely results in a reduction in the interest rate or the amount owed to the lender.
The FTC also states that, “If there’s a possibility that you’ve been ripped off by an auto loan modification fraudster, file a complaint with the Federal Trade Commission and your state Attorney General.”
The Bottom Line
Consumers, especially those with less than perfect credit, should first contact their lender if they’re having payment issues. Remember, if an offer looks too good to be true, it probably is.
One more thing: If you have poor FICO scores and need a car loan, Auto Credit Express will forward your application to a dealer that understands this and can offer you your best chance for an auto loan approval.
So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.