What Are The Risks of Instant Car Loans?

Instant car loans are typically offered through online lenders who specialize in providing fast approval. The application process is rather short, allowing a person with relatively strong credit to easily achieve financing. Some companies even extend instant car loans to those with poor credit who are typically considered high risk. It may be appealing to utilize one of these instant car lenders because the process is easy and fast. However, taking out a loan is a big decision, and making it hastily can result in many financial errors.

Lack of Negotiation

Instant car loans usually use a simple formula to determine the amount of financing that you are eligible for and your interest rates. This means you will fill out a very simple application, including only statistical or numerical information. Often, a computer will do the work for you, and you will never be dealing with a representative. 

This may sound very easy and attractive, but most lenders will give you better deals if you have time to negotiate. You can present key supplemental information to get a larger loan. For example, if you have only been in the workforce a few years, you may not have a long credit history. You can typically provide verified information about your salary to show your financial stability in this case. With an instant car loan, you may not have the chance to present this information.

Unanswered Questions

Without the chance to sit down face-to-face with your loan representative, you will not have the chance to ask questions. You may think that everything in your loan contract should be self-explanatory, but this is not always the case. Most borrowers have at least a few questions about specific terms and clauses.

For example, your loan may have certain fees and penalties if you modify it in the future. While these are typically expressed in the contract, they may not be very straightforward. Borrowers often find themselves asking questions simply to clarify language in the contract.

Unfavorable Terms

Instant car lenders take advantage of the fact that you are apparently in urgent need of immediate financing. When you are looking to get a car loan within 24 to 48 hours, it is usually because you must purchase a vehicle immediately and are in pressing need of the loan. Lenders build in less favorable terms to your loan contract knowing that you do not have the luxury to say "no" or to shop around very much.

Telling a lender you need the loan enough that you are willing to close on it instantly, without questions, puts you at a disadvantage. Many borrowers forget that they have the authority to seek many different quotes and decide which lender is best. There are more than just limits and interest rates to think about. The terms of your contract are important, and you should negotiate these terms to protect yourself in the long run.


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