6 Online Auto Loan Scams to Watch Out For
The Internet has made it easier to do business in every way, including banking. Most people can access their bank online, pay bills online, and even shop for loan products online. However, when shopping for an online auto loan, it is important to be aware of the many scams perpetuated on the internet.
1. Credit Score Scams
Your credit score makes a difference on the interest rate you'll be offered for your loan. It's important that you know what your credit score is, directly from the credit reporting agencies, because one of the most common scams is for the online lender to tell you that your credit score is lower than it is in order to increase the interest rate you are charged for the auto loan.
2. Up Front Fees
Be extremely wary of online auto loan offers that require you to pay an up front fee. Most likely, if you pay the fee, you will never see the money again, nor will you get the loan you are applying for. A legitimate lender will require a loan application and possibly a loan application fee, but will not charge you other fees for obtaining the auto loan. If the company asks you to wire a percentage of the car loan or down payment to an escrow account, this is almost definitely a scam and you should walk away quickly.
3. Guaranteed Loans
Any time an online lender advertises guaranteed approval, you should proceed with caution. Guaranteed approval is simply a way to draw in people and target people who would otherwise be unable to buy a car and who become victims because of their income or credit rating.
4. Identity Theft
When applying for a loan, most loan applications require your social security number, name, address, phone number, and birth date -- everything a scam artist needs to steal your identity. Be exceedingly cautious about filling out an online loan application. Double check with the Better Business Bureau or your local consumer protection program to determine the legitimacy of the business. Run a search on the web address and see if you pull up any warnings from other scammed consumers.
5. Requiring a Co-Signer
When applying for an online auto loan, some lenders will try to convince you that the only way you can be approved is to have a cosigner. Unfortunately, some unethical lenders will proceed to process the loan only in the cosigner's name and not your own, making it virtually impossible for you to insure the car or build your credit with it. Be sure that if you do include a cosigner that both of your names remain on the application.
6. Changing the Terms
Occasionally, an online lender will tell you that you've been approved and allow you to drive away with the vehicle, only to call you back and say that the loan wasn't approved after all because of your credit. The lender will then try to increase the interest rate, thinking you will agree since you already have the car. This scam is easily avoided by simply returning the vehicle and walking away with your down payment.
An online auto loan can save you time and money, but be aware of the risks. Know where you are applying before you provide your personal information, and be ready to walk away if something isn't right.