How To Spot Auto Loan Modification Scams?

Vehicles have become a necessity for many people. However, if they fail to make payments on those vehicles, then it could be taken from them.

Many people who find themselves struggling to make repayments on a vehicle become attracted to offers from companies that claim to be able to reduce their monthly payments.

Everyone should be wary of such claims. Many companies offering superior rates charge upfront fees that can often total several hundred dollars.

These companies boast about its links to lenders, its ability to reduce your monthly costs, and its many testimonials from happy customers.

How You’re Scammed

Those who fall victim to such schemes tend to recall a similar tale. They pay an agreed amount for the lower rate modification to their loan, then end up never receiving the promised new loan. To make matters worse, they are often instructed by the scam lender to end car payments while they claim to be negotiating a new deal with lenders. 

The customer only learns of the problem when their existing lender gets in touch about repossessing their vehicle due to missed payments.

Scam lenders will often insist on receiving extra fees to continue sourcing a lower-rate loan.

Such scams are similar to those carried out for mortgage loan modifications. Whether it’s money for a home or a car, the playbook is the same for fraudsters.

Individuals looking for lower monthly loan repayments will pay money upfront for a service they never receive.

When You're Behind On Car Payments

Should you find yourself struggling to make vehicle repayments, contact your lender immediately to discuss the options available to you. Don’t turn a blind eye to your problems.

The longer you do this, the worse the situation will become, and the more limited your options will become.

General vehicle loan modifications involve extending the loan term in order to reduce monthly payments or deferring payments that have been missed until the end of the loan period. Extending the loan term will increase the total amount repayable even if monthly payments are lower.

Even if the interest rate itself is lowered, you’ll still end up paying more in interest payments. It’s rare that creditors will issue a car loan modification that lowers the principal amount or the interest rate. 

If Your Car Is Repossessed

If you fail to make payments on your car, then the creditor has the legal right to repossess your vehicle, without a court visit or a notice period. They may also decide to sell on your vehicle contract to a third party, known as an assignee. By taking over the contract they would retain the right to repossess your vehicle just as the original creditor could. Some states impose limitations on how a creditor may repossess. 

Once repossessed, the creditor may keep the vehicle or sell it. They should inform you of their intentions, since you may have the opportunity to purchase it back. For example, It could be repurchased at a public auction or even by reinstating the loan, though this will inevitably come with extra fees.

How To Report Fraud

If you’ve been the victim of a vehicle loan modification scam, you should file a complaint with the Federal Trade Commission. A simple form can be filled in on their website. Those filing a report should always keep a copy of their submission.

Alternatively, you can call them on their toll-free number at 1-877-FTC-HELP (1-877-382-4357). 

In recent years, the FTC has successfully sued many scam lenders that have failed to honor promises made to customers. The FTC makes an ongoing effort to protect customers in financial distress from fraudsters.

When filing a complaint, your report may be shared with local, state, federal, and foreign law enforcement partners.

You should also file a complaint with your state Attorney General. Hopefully, you’ll retrieve any lost money paid out to the scammers. 

Bottom Line

Vehicle loan modifications sound very tempting for those struggling with vehicle payments, but owners need to be extremely wary.

The Federal Trade Commission makes it clear that such talk is often nothing more than scam artists extracting money from customers without providing anything in return. Many scam companies never even contact a lender to source a better deal. 

If you’re the victim of a scam, then report it immediately. If you’re struggling to make repayments on a vehicle, contact your creditor immediately to try and resolve the problem.

A missed payment could lead to your vehicle being repossessed without any notice.