Bad Credit Auto Refinancing Loan

you’ll have to pay more in fees and interest. Unfortunately, those in this position are often targets of lenders who are dishonest and who take advantage of the less fortunate and desperate. While it’s a given that you’ll pay more for credit if your history has deteriorated, it’s by no means a justification for predatory practices. You are still entitled to fair terms and all of the same disclosures of costs and repayment terms that you would get if you were borrowing from a bank.

What a predatory lender looks like

There’s a good chance that a predatory lender will approach and pursue you, rather than the other way around. You may find flyers lying around, receive offers in the mail, or be called by telemarketers. The chances are that these lenders have already determined that you have bad credit and might have trouble receiving financing through traditional channels.

Predatory lenders will often make it sound like they are offering you something that will fix all of your financial problems. They play on many people’s desire for a “quick fix” to complex situations that might take years to realistically resolve. A good rule to remember: if it sounds too good to be true, it probably is.

A common tactic predatory lenders use is to tell you that your bad credit won’t be a problem. This is simply untrue, no matter who is lending you money. They may still be willing to make the loan, but will make sure you pay more in interest in fees to compensate them for the higher risk they are taking.

A predatory lender might also encourage you to stretch the truth, or even lie outright, on your loan application. A legitimate lender would never encourage you to do this. It is in fact, illegal, and considered fraudulent behavior.

Another hallmark of the predatory lender is the use of pressuring tactics. You might be told you need to sign loan documents quickly or favorable terms will no longer be valid. Do not give in to this type of pressure. A reputable lender will give you all time you need to read and sign documents.

Another tactic predatory lenders use is to try to make you believe that you have no options. They want you to think that no one else will lend to you because of your poor credit. If they are a legitimate lender and are willing to lend to you, they are probably not the only ones. Find out what your options are before going with the first lender to approach you.

What a predatory loan looks like

Even if a lender doesn’t send up any of the red flags above, always be sure you understand and are comfortable with the terms of a loan before signing any documents. A loan with predatory terms will often have documents that are difficult to read and understand, even if you’re not being pressured to do it quickly.

You might even be encouraged to sign blank documents for the lender to “fill in” later. Do not do this under any circumstances. Once you have signed loan papers, you are legally bound to the terms stated within them. Only sign documents where you are able to read and understand the terms.

A predatory loan often presents a “bait and switch,” offering you one thing up front, and presenting something else entirely when it’s time to finalize the deal. If you see anything that looks different from what you initially agreed to, or if it looks like the terms will be difficult for you to meet, don’t sign the documents.

How to ensure a lender is legitimate

Although you may know how to spot a predatory lender, it’s ideal if you don’t have to deal with them in the first place. Generally, a good rule is to seek out a lender yourself, rather than respond to solicitations. Talk to people you know and find out where they borrow money. Seek out a reputable mortgage broker who will have contacts for lenders able to meet just about any need.

Even if your bank won’t loan you money, it may be able to point you to someone who does. A well-connected banker will have all sorts of contacts in the financial world who might be able to extend you credit. In addition, many large lending institutions have sub-prime lending arms to which they regularly refer customers.

Just because you have bad credit doesn’t mean you deserve to be the target of predators. Look for reputable lenders who will be honest about the type of loan you can get and avoid those who avidly court you.

If you have bad credit, take extra care to avoid predatory lenders who try to con you into unfavorable loans.